Wall Street: Adios, Fractions!

Algerian policemen inspect damages of the buildings of Prime minister's offices following a suicide car exploded near the Governmental Palace in the center of Algiers City April 11, 2007.
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Fractions are no longer welcome on the New York Stock Exchange.

Starting Monday, the exchange will trade all its stocks in decimals, the last step in a government-mandated move that has been planned for three years.

Nearly 3,400 stocks that until now have been traded in halves, quarters, eighths and sixteenths are due to be switched when trading begins Monday. Exchange officials aren't too nervous - they've had some practice, with 159 issues already trading in decimals as part of a pilot program that began last summer.

"The decimal capability is already embedded in the exchange systems," said Bob Britz, NYSE's executive vice president of market operations, technology, and market data.

The same change is scheduled Monday on the smaller American Stock Exchange, which also launched a pilot program last summer. An estimated 1,500 stocks and options will be affected there.

But the switchover won't involve all U.S. stocks, at least not yet. The Nasdaq Stock Market, home to more than 4,600 companies, including Intel and Microsoft, plans to start converting its trading to decimals in March and finish by April 9, the deadline set by the Securities and Exchange Commission.

The SEC ordered the shift to decimalization on the theory it would make stock prices easier for investors to understand, and potentially open stock bidding and selling to more competition.

CBS MarketWatch chief economist Irwin Kellner says one reason it took so long to make the switch is that brokers made a profit on the old system, by rounding up trading prices to the next highest fraction.

Kellner adds the new system will "make the price clearer to people. Once everyone gets used to it, it will help in terms of lowering prices."

Fractions had been used to trade stocks for more than 200 years, a legacy of Spanish traders, whose currency was in increments of eighths.

In a decimal system, a stock selling for $16 3/8 a share is priced at $16.38. Shares that were priced at $10 11/16 would be listed at $10.69.

For most individual investors, the adjustment to the new system should be minimal. Most newspaper tables converted to decimals last summer, and many brokerages have spent months preparing their customers for the change.

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