Datek Is First To Offer Stock Trading In Decimals - InformationWeek

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Datek Is First To Offer Stock Trading In Decimals

Datek Online Brokerage Services LLC on Monday will become the first brokerage house to offer decimal trading of Nasdaq-listed stocks. Instead of trading stocks using fractions to represent value, customers can trade a limited number of Nasdaq stocks using dollars-and-cents values.

However, the Datek offering is experimental, as the Securities and Exchange Commission isn't asking exchanges and brokerage houses to adopt decimal trading until April 9. Nasdaq, for example, is still working at getting its IT systems prepared for decimal trading. But Datek says that by allowing customers to trade in lower increments--down to a penny difference in stock prices--it can provide them with a competitive advantage.

Competing online brokerage DLJ Direct says it will offer decimal trading when the exchanges are prepared to completely phase in decimals. By introducing decimal trading before that, "the potential for consumer confusion exits," says Michael Hogan, senior VP at DLJ Direct.

E-Trade has offered decimal trading in Canada for three years, but won't extend that service to its U.S. customers until next year--primarily for the same reasons as DLJ Direct. "It would be fairly confusing to consumers to have some stocks traded in fractions and some in decimals," says Stephen Richards, E-Trade's chief online trading officer. "The best choice is to suspend decimalization until all participants are ready."

While initially it may be cumbersome to translate fraction quotes to decimal quotes, it may be an easier transition for novice investors than for professionals, says Dana Stiffler, an analyst at Meridien Research. "Retail investors have just gotten into the game of online trading, so it will not be hard for them to make the mental leap," she says.

To help its customers to better understand the process of decimal trading, Datek will host an Internet Webcast and chat session at 7 p.m. EDT July 12. Participants can register here.

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