Institute Strongly Supports Continued Decimalization

Washington, DC, May 20, 2003 - The Institute strongly supports decimalization in the U.S. equity markets, and urges the SEC to address much needed market reforms in the wake of recent debate.

Background
Decimalization was implemented to simplify the pricing of securities for investors and reduce price spreads. Although decimalization was introduced fairly recently, it appears to have achieved these goals. Critics of decimalization have claimed that its introduction has reduced transparency and increased volatility and transaction costs, offsetting the cost savings from reduced spreads.

ICI Position
The Institute continues to strongly support decimalization. Investors, including the millions of Americans who participate in our equity markets through mutual funds, do not have to be subject to artificially wide spreads in order to obtain the benefits of deep, liquid, and transparent markets. The Commission and the securities markets should seize upon the debate over decimalization as an opportunity to undertake long-overdue reforms to improve the market quality.

A May 19 comment letter expresses the Institute's support for decimalization.

Related Links
In December 2000, the SEC's Division of Market Regulation held an initial roundtable to discuss the conversion to decimal pricing in equity securities and options and its effects on market quality, operational capacity, and trading behavior. For more information on decimalization and other related issues, visit the markets and investment advisers section of the Institute's website.