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NYSE Program Stock Trading Dips in August

Times Staff Writer

Use of the controversial techniques called program trading fell in August among members of the New York Stock Exchange, accounting for 8% of their overall trading, compared to 10% in July, the exchange said Thursday.

The data seemed to offer support for the view that such computer-directed trading represents only a modest slice of total stock trading and could further ease pressure for curbs on the practice. Some critics have charged that the use of program trading helped destabilize the market during last October’s crash.

In its second monthly report on program trading, the exchange said program trades in August averaged 11.7 million shares daily on the Big Board, out of an overall average daily volume of 144.7 million shares. In July, program trading averaged 16.9 million shares daily, compared to an overall average daily volume of 166.9 million shares.

Morgan Stanley Leads

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Wall Street observers attributed the falloff in program trading to the lower activity and volatility in the market. “The market was simply less active, so there was less opportunity” to use the techniques profitably, said Robert Gordon, president of Twenty-First Securities in Manhattan.

The top program trader was again the Morgan Stanley & Co. investment firm, which reported program trades of 40 million shares for the month. Morgan Stanley was also first in the July report, with volume of 83.7 million shares.

The other top program traders were Susquehanna Investment Group, 34.6 million shares; Paine Webber Group, 32.6 million shares; Merrill Lynch & Co., 30.5 million shares, and Bear, Stearns & Co., 30.5 million shares.

Eric Brooks, an executive at Susquehanna Investment Group, said the decline may also reflect declining interest among some investment firms, which have found that growing competition has cut into their profits. “Some people are backing away,” he said.

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The exchange defined program trading as any of several trading strategies involving the purchase or sale of “baskets” of 10 or more stocks.


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