Some Orders Processed After Hours : SmithKline Options Trading Soars
Frenzied trading of SmithKline Beckman options led the Pacific Stock Exchange to invoke the little-used “closing rotation” rule Wednesday to help frazzled traders make sense of the day’s action.
The rule is invoked when an extraordinary level of trading makes it physically impossible for all buy and sell orders to be processed by the exchange’s closing time of 1:10 p.m., said PSE spokesman Roy Berces.
Under the rule, traders are allowed to complete after normal business hours any orders placed during the day but not processed by the close of trading, he said.
In all, Berces said, more than 100,000 options contracts were traded on the exchange Wednesday, with orders for SmithKline Beckman contracts accounting for 60% to 70% of the total.
Trading in the stock of the Philadelphia drug, medical services and scientific instruments company has been unusually active for the past week. The activity was fueled first by speculation that an acquisition was in the making, then by confirmation of merger talks between SmithKline Beckman and London’s Beecham Group.
A total of 14.2 million shares of SmithKline Beckman common stock--an average of 2 million shares a day--has been traded on the New York Stock Exchange since March 28. And the stock price--even including the steep $1.75-a-share decline Wednesday--has risen 21.6% in the last week.
Analysts said that Wednesday’s decline--coming after run-ups of $5.25 a share on Friday and $4.75 a share on Monday--was in part the result of a feeling that risk arbitragers were driving the price too high.
SmithKline Beckman shares closed Wednesday at $64.125 a share with 3.5 million shares traded.
Shares of Beckman Instruments, a Fullerton-based subsidiary, closed down $1 at $21.25 Wednesday, but the stock was still up 9.7% for the past 7 trading days. Industry analysts say SmithKline Beckman, which owns 84% of Beckman Instruments, is likely to sell the profitable maker of scientific and medical instruments once its own future is determined.
