SEC Confirms Deadline For Decimalization Has Been Delayed From July

WASHINGTON, DC--Securities and Exchange Commission chairman Arthur Levitt last week laid the blame for the delay in decimalization at Nasdaq’s door. Decimalization, which the SEC intended to phase in starting July 3, has now been officially delayed.

The National Association of Securities Dealers (NASD) recently expressed concern about its readiness to proceed with the conversion to decimal trading. Association chairman and CEO Frank Zarb sent a letter to Levitt at the SEC earlier this year that highlighted the NASD’s concerns regarding the recent growth in Nasdaq, stating that it was now more sensitive to capacity issues. Nasdaq felt that if the conversion to decimalization were to go ahead as originally planned on July 3 it might cause an enormous rise in quote traffic volumes that would overwhelm Nasdaq’s systems.

In the letter dated April 7 to the US House of Representatives’ Committee on Commerce, Levitt stated that "at this point in time we simply do not have the necessary assurance to determine if ordering the listed market to move ahead by Labor Day would create widespread complications…. In a time of unprecedented volume and volatility, I believe it would be ill-advised to force a major structural change in our markets without the confidence that order will be maintained."

In recent weeks Levitt hinted that a delay might be plausible, but he noted that he wanted to make the transition to decimals as quickly as possible, provided it was done in a manner that protected investors.

Nasdaq has not passed any comments on the letter from Levitt, but it did indicate that the earliest point at which it could begin quoting in decimals would be early 2001. The New York Stock Exchange, however, has confirmed it is ready to quote in decimals this summer.

Following Levitt’s letter, the deadline by which the major US markets were scheduled to submit transition plans for the switch to decimals was postponed. The SEC previously indicated that all plans were to have been received by the commission by April 14, as set in its January 28 order. The new date for submissions was unknown at press time.