Shearson Lehman Suspends Computer Program Trading

Wall Street giant Shearson Lehman Brothers Inc. today suspended a controversial form of computer-driven trading in what it said was a response to concerns that the technique inflamed volatility on Black Monday.

Shearson and its pending merger partner, E. F. Hutton Group Inc., said index-arbitrage program trading would be suspended for their own accounts beginning today, “in response to concerns expressed by clients that program trading may exacerbate market volatility.”

Laurie Heffner, a Shearson spokeswoman, said the suspension was indefinite and probably would last for months, depending on the outcome of a number of investigations and studies into causes of the crash.

Index-arbitrage program trading refers to the practice of buying large quantities of stocks on the New York Stock Exchange and selling the equivalent stock-index futures in the Chicago futures markets, or vice versa, to profit from temporary price disparities.