Despite the SEC's recent decision to delay its mandate for the securities industry's conversion to decimals, the Island ECN has stepped forward and says it will begin pricing in decimals, July 3rd, the commission's original conversion deadline. "Island always took the congressional mandate very seriously and given that we have the technological capacity to do that, we thought it would deliver to the individual investor a fairer, simpler and more orderly way to trade," says Andrew Goldman, vice president of corporate communications at Island. "Most importantly, we thought that by embracing decimal-based trading, Island would create the proper economic incentives for other market places to also adopt decimal-based trading." He adds that the Island book will be showing decimal prices on the July 3rd date, and prices will be rounded and converted when reported to other markets that are still in fractions. The ECN will continue to offer fractional pricing as an option until the industry conversion is complete.
The SEC officially suspended the original deadlines for the conversion to decimal pricing and has issued a concept release requesting comment on two alternative plans for decimalization. The SEC emphasized that markets will eventually move to decimal pricing, but the July 3rd deadline was abandoned following the NASD's announcement that it would not have the capacity to handle trading in decimals by that date.
The first revised timeline for the implementation would push the mandatory date back to September 4, 2000 for decimal pricing in all exchange-listed securities. The second proposed plan would be a phased-in pilot-program approach, with pricing in a small number of certain listed securities to begin trading in decimals on September 4th and extending decimal pricing to all securities by March 31, 2001. Comments to the SEC on the alternative decimal conversion plans must be received by May 3rd. Following that date, the commission is expected to issue a new conversion schedule.
The Securities Industry Association has indicated its approval of the decimalization extension and has publicly supported a phased-in approach, when the markets and participants are ready, says a spokeswoman for the SIA. She also says the SIA does not view the SEC's pilot-program alternative for decimalization, in which some of the securities will trade in decimals while others remain in fractions, as the best approach to decimal conversion.