SIXTEENTHS DEBUT AT NYSE; BIG BOARD RESISTS CHANGE.

Byline: Floyd Norris The New York Times

Get ready for sixteenths.

Prices of stocks on the New York Stock Exchange, which have been traded in increments of -1/8 of a dollar - 12.5 cents - for the Big Board's entire history, began trading Friday at increments half that large - 1/16, or 6.25 cents. There were, in fact, some trades at 1/32, or increments of 3.125 cents.

That move was instituted by a couple of so-called third-market firms, which trade Big Board stocks but do not do so on the exchange. They are Bernard L. Madoff Investment Securities of New York and Trimark Securities of White Plains, N.Y.

The Big Board is not yet going along with it, and requires that stocks quoted on its floor be quoted in eighths, unless they are trading under $1. It will not even process trades in between. The new move will put pressure on the exchange to alter that rule. Big Board officials had no comment Friday.

Arthur Levitt Jr., the chairman of the Securities and Exchange Commission, applauded the moves. ``I've always felt that competition should drive the pricing increments used by the markets,'' he said. ``It looks like that is what is beginning to happen here.''

For investors, the result is likely to be narrower spreads between the price they can buy stock at - the bid - and the price they can sell it at - the asked price. But it will also mean more confusion for investors. Would you rather sell a stock for -3/8 or for 13/32? (Answer: the former is 37.5 cents, the latter a bit more than 40.6 cents.)

The rules against trading in increments of less than an eighth have been breaking down for some time. Instinet, an electronic system open to brokers and institutional investors, has been quoting stocks in smaller increments for years, and the SEC has begun requiring that those quotes be made available through other systems. That is expected to happen later this year for Big Board stocks. The American Stock Exchange and the Nasdaq stock market have moved to allow one-sixteenth increments in normal trading on their systems, but the Big Board has resisted.

At one point Friday afternoon, the best bid on brokerage machines for Kmart stock was 13 13/32, and the best asked price was 13 15/32. Both were from Trimark.

But while there were a number of trades at those prices, none was on the Big Board. There are no electronic ways for access to third-market brokers from the exchange, and exchange rules barred trading at those prices.