Program Trading Averaged 21.9 Percent Of NYSE Volume During Sept. 13-17

The New York Stock Exchange today released its weekly program-trading data submitted by its member firms. The report includes trading in all markets as reported to the NYSE for Sept. 13-17. The data indicated that during Sept. 13-17, program trading amounted to 21.9 percent of NYSE average daily volume of 756.0 million shares, or 165.2 million shares a day. This included program trading associated with the Sept. 17 quarterly expiration of stock-index options and futures. Program trading encompasses a wide range of portfolio-trading strategies involving the purchase or sale of a basket of at least 15 stocks with a total value of $1 million or more. Program trading is calculated as the sum of the shares bought, sold and sold short in program trades. The total of these shares is divided by total reported volume. This is not the only way to measure program trading. Three alternatives for Sept. 13-17 would be to: examine buy programs as a percentage of total purchases (10.7 percent); examine sell programs as a percentage of total sales (11.2 percent); examine program purchases and sales as a percentage of total purchases and sales or twice total volume (10.9 percent); For the third quarter of 1999, the NYSE's program-trading report includes profiles of program trading whenever the Dow Jones Industrial Average moves 210 points or more in a single direction during any one-hour period. During Sept. 13-17, there were no such periods. In all markets, program trading averaged 240.0 million shares a day during Sept. 13-17. About 68.9 percent of program trading took place on the NYSE, 17.1 percent in non-U.S. markets and 14.0 percent in other domestic markets, including Nasdaq, the American Stock Exchange and regional markets. In aggregate, program volume executed on the NYSE by firms as agent, for non-member customers, amounted to 60.5 percent during Sept. 13-17. Program volume executed as principal, for their own accounts, amounted to 35.5 percent of program volume. Another 4.0 percent was designated as customer facilitation, in which a member firm established or liquidated a principal position to facilitate a program order initiated by a customer. Of the five member firms reporting most program activity on the NYSE, Morgan Stanley, Bear Stearns and BNP Securities executed all or most of their program activity for customers, as agent. First Boston and Deutsche Bank Securities executed most of their program trading activity as principal for their own accounts. During Sept. 13-17, 17.8 percent of program volume executed by NYSE member firms related to index arbitrage. Index arbitrage is defined as the purchase or sale of a basket of stocks in conjunction with the sale or purchase of a derivative product such as stock-index futures, to profit from the price difference between the basket and the derivative product. Another 0.3 percent involved derivative product-related strategies (besides index arbitrage) that are subject to Rule 80A. The rule provides that derivative-related program strategies be executed only in a stabilizing manner after the DJIA moves 210 points or more from the previous day's close. In addition to index arbitrage, such strategies include customer facilitations, liquidation of facilitations, index substitutions, liquidation of error accounts, risk modifications, and liquidation of exchange-for-physicals stock positions. All other types of portfolio-trading strategies combined accounted for 81.9 percent of member firms' program-trading volume during Sept. 13-17.