Computerized stock trading: stormy image, quiet reality
Article Abstract:
Bankers Trust Co, one of the largest money managers to use program trading and index arbitrage, trades less than 10 percent of its portfolio compared to the 50 percent that other securities firms trade. Still, that small percentage accounts for $80 billion dollars annually; $36 billion is invested in the stock market by Bankers Trust. Bankers Trust manages its funds passively by not taking into consideration how a company will perform in the future. The tremendous volume of investments Bankers Trust and other traders invest with the assistance of computer programs is believed to be responsible for the stock market's recent fluctuations. A small drop in the market rapidly becomes a valley if these large companies trade as a cohesive group. Companies involved in the process do not believe their trading policies are responsible for the stock market's actions, and do not want to see it regulated.
Publication Name: The New York Times
Subject: News, opinion and commentary
ISSN: 0362-4331
Year: 1989
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Wall St.'s 2 camps: program trading divides brokers
Article Abstract:
The recent stock market 190-point plunge is separating Wall Street into two different groups: Wall Street's fundamentalists blame computer-hungry traders and their formulas for affecting the market's natural ebb and flow; the new order claims that Wall Street cannot yet assimilate the hundreds of millions of dollars worth of stock trades that have become more commonplace as pension funds have dramatically grown is size. The fundamentalists believe that the stock market is in danger of being destroyed by professional traders and investors who base their buying or selling decisions on complex computer-based strategies that may not have anything to do with a company's earnings or management. A software program might indicate a buying opportunity simply because stock prices are no longer aligned with other benchmarks the program uses to evaluate value.
Publication Name: The New York Times
Subject: News, opinion and commentary
ISSN: 0362-4331
Year: 1989
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Bear, Stearns will resume index arbitrage for itself
Article Abstract:
Bear, Stearns was one of a number of firms which agreed in Oct 1989 to cease index arbitrage for its own account when such computer program trading practices were blamed for abrupt changes in the stock market. In Dec 1989, Bear, Stearns was one of the first to announce it would resume index arbitrage for its own account. Index arbitrage is the most controversial type of program trading. Program trading is defined by the New York Stock Exchange as the sale or purchase of at least 15 stocks simultaneously. Index arbitraging profits from momentary changes in the price of a futures contract as compared to the price of the basket of stocks on which that contract is based. During Sep 1989, 24.1 million of the 28.2 million shares executed by Bear, Stearns were its own rather than customers'.
Publication Name: The New York Times
Subject: News, opinion and commentary
ISSN: 0362-4331
Year: 1989
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Comment about this article or add new information about this topic:
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