(February 15) – “Will pennies turn to nickels?” asks Jeff Opdyke in today’s Wall Street Journal.

“Less than three weeks into the revolutionary conversion to ‘decimal’-based stock prices on the New York Stock Exchange, the Big Board is expected to begin considering a proposal to modify the system to force certain trades to move in increments of five cents instead of the current penny.”

“The proposal will be presented at a meeting before the opening bell tomorrow morning in which New York Stock Exchange Chairman Richard Grasso and other Big Board brass gather with a group of institutional traders and Wall Street firms.”

“The meeting was called, in part, to address whether NYSE specialist firms and other investors should be prevented from profiting from institutional transactions by ‘stepping in front of them’ with offers just a penny a share higher. Under the proposal, they would have to increase the price by at least five cents a share.”

” ‘People are being emotional right now, and I can understand that,’ Mr. Grasso said in an interview Wednesday, ‘but what you’ve always seen is that when there’s a secular change, we are quick to respond, and we’re effective in that response.’ “

“Should the Big Board modify decimal trading, which would require Securities and Exchange Commission approval, it is unclear how many shares a day would be affected. The SEC pushed for the U.S. stock markets to convert to decimals because they theoretically allow investors to get better prices, as stocks move in smaller increments. The Nasdaq Stock Market has been slower than the Big Board in making the switch; it plans begin its switch on March 12, with just 15 stocks at first.”

“Ever since the Big Board switched to pricing all of its listed shares in decimals on Jan. 29, institutions have complained that some specialists — the elite floor-trading firms in charge of trading in specific stocks — and other investors have been breaking apart large-block orders by improving the price by just a penny. This is what the Street derisively has begun to call ‘being pennyed.’ “

“As a result, some Wall Street firms are taking at least some of their business to alternative markets, such as the so-called third market or to smaller regional exchanges around the country, according to investors and NYSE officials. Fear that this practice will grow, and ultimately sap market share from the world’s largest stock exchange, is adding impetus to Friday’s meeting.”