AOL Surge Raises Issue of Timing

Standard & Poor’s Corp. said Thursday that it might change the way it delivers news of index changes, after America Online Inc. stock surged earlier in the week when certain traders were told AOL would join the S&P; 500 index.

S&P;, a unit of No. 1 U.S. educational publisher McGraw-Hill Cos., faxed announcements and alerted clients about the change between 4:50 and 5:15 p.m. Eastern time on Tuesday, after the market’s close. That allowed some traders to buy the stock through off-exchange dealers and electronic networks, such as Reuters Group’s Instinet, giving AOL its closing high of $138.

Index changes can boost the price of a stock, but they aren’t disclosed to all investors simultaneously, and that inequity can benefit large investors who get the news first.

Senior investment officer David Braverman said S&P; has always made its announcements about index additions and deletions at 4:50 p.m., and the review won’t necessarily result in a policy change. Typically, the New York Stock Exchange doesn’t allow after-hours trading in stocks involved in an index-change announcement, and AOL was no exception, Braverman said. The price move came from off-exchange trading.

AOL will be the first Internet stock in the 500-stock blue-chip index, the benchmark against which professional money managers are often judged, when the stock is added at the close of trading Dec. 31.

In Thursday’s abbreviated session, AOL closed at $136.63, down $1.38.