[Congressional Record Volume 143, Number 32 (Thursday, March 13, 1997)]
[Extensions of Remarks]
[Page E471]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               THE COMMON CENTS STOCK PRICING ACT OF 1997

                                 ______
                                 

                         HON. MICHAEL G. OXLEY

                                of ohio

                    in the house of representatives

                        Thursday, March 13, 1997

  Mr. OXLEY. Mr. Speaker, I am pleased to introduce today the Common 
Cents Stock Pricing Act of 1997, a bill to modernize the way stock 
prices are quoted in today's securities markets. I am especially 
pleased to be joined by the ranking member of the Telecommunications, 
Trade, and Consumer Protection subcommittee, Ed Markey, Commerce 
Committee Chairman Tom Bliley, and my colleagues Paul Gillmor, Mike 
Crapo, Elizabeth Furse, Steve Largent, Greg Ganske, and Rick Boucher in 
this important initiative. I am proud to continue the tradition in the 
Commerce Committee of working together with my colleagues on both sides 
of the aisle to pass legislation that significantly improves the way 
our securities markets are regulated, as we did last year with the 
passage of the Private Securities Litigation Reform Act and the 
National Securities Markets Improvement Act.
  The Common Cents Stock Pricing Act will eliminate regulatory 
obstacles that stand in the way of competitive forces. It will also 
make stock prices easier to understand for the average investor.
  The current rules of self regulatory organizations, like stock 
exchanges, require that stocks trade in fractions. These rules stem 
from practices from the 17th century, when the colonies used Spanish 
dollars as their currency. These ancient coins were called ``pieces of 
eight'' because they could be chiseled into eight pieces, with each 
piece called a ``bit.'' When organized stock trading began in New York 
in 1792, stock prices were quoted in bits, or eighths. We don't use 
Spanish coins today--but the tradition of pricing stocks based on these 
coins is still with us, in the form of SRO rules.
  This pricing system based on ancient coins is not just anachronistic. 
It makes stock prices difficult for average investors to understand. At 
least one newspaper has recognized this fact--the San Francisco 
Chronicle recently began printing its stock tables in dollars and 
cents, instead of fractions.
  And fractionalized pricing is not simply more difficult to understand 
than prices in dollars and cents. The rules of Self Regulatory 
Organizations that impose fractionalized pricing effectively mandate a 
minimum spread between a stock's buy and sell price of an eighth of a 
dollar. To the rest of us, that means 12\1/2\ cents. That means that 
floor traders capture a minimum of 12\1/2\ cents from investors on 
every trade. SRO rules make it impossible for competition to further 
narrow the spread for the average investor. Large institutions can get 
better deals on their trades by negotiating prices on block trades--but 
regular investors have to pay full freight.
  Fractionalized stock pricing is out of step with the rest of the 
world. The United States is the only major market that uses the pieces-
of-eight system to price stocks--every other major market in the world 
uses decimal pricing. The advancement of telecommunications technology 
is making it increasingly easy to trade stock on exchanges around the 
world, simply by pressing a computer key. If we are to maintain our 
position in the United States as the home of the most successful 
capital markets in the world, we must keep pace--and fractionalized 
pricing is a thing of the past, not the future.
  Securities and Exchange Commissioner Steve Wallman has been an 
outspoken advocate of the need to modernize the pricing rules that 
apply to U.S. stocks, and provided us with informative testimony at the 
hearing last week before the Subcommittee on Finance and Hazardous 
Materials. Commissioner Wallman estimated that fractionalized stock 
prices cost retail investors about $1.5 billion a year. Investors could 
save that money if we converted our stock pricing system to the system 
we use for virtually everything else we buy--dollars and cents.
  I have read with interest observations of the Toronto Stock 
Exchange's recent conversion to decimal pricing. On the Toronto Stock 
Exchange, there is no longer a minimum spread of 12\1/2\ cents--and, as 
a result, the spreads that floor traders from public investors has 
narrowed. I look forward to learning more about that exchange's 
experience as we proceed with hearings on decimal pricing.
  I also look forward to learning about how a change to decimal pricing 
would impact the participants in our markets. In this regard, I intend 
to hold hearings at which we will hear testimony from experts in 
securities markets, security firms, stock exchanges, and investors. I 
welcome the views and comments of all parties that will be affected by 
this initiative, to ensure that we implement this modernization with 
practicality and efficiency.
  I thank my colleagues on both sides of the aisle for their 
cosponsorship of this important initiative, and encourage all of the 
Members of the House to support this effort to bring common sense to 
stock prices in the U.S. markets.

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