Securities Pricing: Trading Volumes and NASD System Limitations Led to Decimal - Trading Delay

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DIANE Publishing, 2002 - 51 pages
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Examines the progress that the securities industry (SI) has made toward the implementation of decimal pricing (DP) for U.S. stocks. The U.S. equity markets are the only major equity markets that still use fractional pricing. Some have projected significant savings to investors following implementation of DP. This report addresses these questions: what were the reasons that the Nasdaq market was not ready for the July 3, 2000, implementation date & how NASD's DP preparations compared with those of the NYSE; how SEC approached oversight of the SI's implement. of DP & how this compared with its Year 2000 effort; & what challenges remain regarding implementing DP.
 

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Page 1 - Ranking Minority Member Committee on Commerce House of Representatives The Honorable Michael G. Oxley Chairman, Subcommittee on Finance and Hazardous Materials Committee on Commerce House of Representatives The Honorable Bud Shuster Chairman The Honorable James L.
Page 18 - Subcommittee on Finance and Hazardous Materials. Committee on Commerce. US House of Representatives (June 13. 2000). " Stock Market Automation: Exchanges Have Increased Systems' Capacities Since the 1987 Market Clash (GAO/IMTEC-91-37.
Page 27 - Appurtenances. The incidental rights and interests which attach to and pass with the land; for example, right-ofway, easement, barns, and orchards. Arbitrage. 1. Buying securities, commodities, or foreign exchange in one market and simultaneously selling the same thing in another market to take advantage of a difference in price quotations between the two markets. 2. Buying an item and simultaneously selling another item into which the first is convertible, in the same market. The first type of arbitrage...
Page 31 - We requested comments on a draft of this report from the heads, or their designees, of the Federal Reserve, OCC, Treasury, and SEC.
Page 9 - As a result of a January 2000 SEC report on Nasdaq's information systems, SEC recommended that NASD hire an external contractor to review NASD's infrastructure capacity and its capacity planning process. In response, NASD contracted with...
Page 39 - NASD's computer operations and identified to the NASD staff concerns about the NASD's capacity planning. In January of this year, the staffs report on its examination to the NASD identified systems capacity as a key concern and recommended that the NASD obtain an independent assessment of its infrastructure capacity and its capacity planning process, and report the results to its governing board prior to June 30, 2000. In January 2000, Division staff surveyed the NASD (as well as the exchanges) regarding...
Page 8 - ... shares are being bought or sold as part of each trade. NASD officials attributed the decline in average trade size to an increase in the number of individuals investing in stocks directly, the implementation of the SEC Order Handling...
Page 39 - NASD's readiness for decimals and to discuss the consultant's progress in its assessment of the NASD's systems capacity and capacity planning. Moreover, in early June, Chairman Levin met with NASD senior management, including its President and Chief Information Officer, to discuss its readiness for decimals and broader capacity issues. On July 21, 2000, we obtained updated information from the NASD on its decimal readiness in response to our second decimals survey.
Page 39 - July 3rd, but indicated that it was continuing testing to confirm its readiness. On March 6, 2000, the NASD advised the Commission that the testing revealed unexpected capacity problems stemming, in part, from unprecedented volume surges, and that it would not have sufficient capacity to meet the target dates for decimals implementation. In response to the NASD's announcement that it would not be decimal ready by July...
Page 5 - ... also reviewed the comment letters that SEC received from securities market, broker-dealer, data vendor, and other officials on the impacts of beginning trading in all securities listed on NYSE and the other regional exchanges before such trading began for all Nasdaq market securities. We conducted our work in Washington, DC; Chicago, IL; and New York, NY; between April and September, 2000, in accordance with generally accepted government auditing standards. NASD was unable to meet the July 3,...

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