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Heavy Stock Volume Tests Limits of Computers, Causes Delays

October 23, 1987

NEW YORK (AP) _ The unprecedented volume of stock trading this week has taxed computer systems beyond their limits at stock exchanges, news services and stock- quotatio n companies, delaying results to stock traders and newspaper readers alike.

″Everybody is running at a rate that far exceeds anything they probably had expected to see,″ Charlie McQuade, president of Securities Industry Automation Corp., said Thursday. The company is owned by the New York and American stock exchanges and provides their computer services.

Volume on the New York Stock Exchange hit 604 million shares Monday and 608 million Tuesday, about twice the number of trades handled on the previous busiest day. The system is designed for about 425 million shares a day, McQuade said. Volume during a typical day is less than 200 million shares, according to the NYSE.

″We had a week where it’s been like a combat unit or a MASH unit with incoming wounded,″ said Tim Cronin, president of Wang Financial Services, which offers financial news and stock prices to stock traders via computer screens.

The New York Stock Exchange announced Thurday it would curtail trading by two hours a day Friday, Monday and Tuesday to catch up with the 2.5 billion shares traded since last Friday.

The securities business depends on timely information so that brokers and traders can make split-second buy and sell decisions based on the latest price of a stock. Nobody wants to sell a stock for $50 a share because he didn’t know that a few seconds earlier it was going for $60.

When a trade takes place, the price and number of shares are fed into the exchange computer and transmitted on high-speed lines to brokers, information services and news agencies across the country. Heavy volume translates to delays in reporting trades because computer systems can handle only so many transactions a second. When the pace of trading exceeds that, the computer falls behind and cannot catch up until the pace slackens.

The furious pace of trading this week also has caused problems at the exchanges matching up who bought and sold what. The NYSE will work Saturday to sort that out.

Many of the delays in reporting closing stock prices originated at the regional exchanges outside New York, McQuade said. Regional exchanges trade NYSE- and Amex-listed stocks and report the transactions through the SIAC system. Because of that, trades on a regional exchange of an NYSE-listed stock affect the price of that stock on the floor of the NYSE and in the NYSE listings printed in newspapers.

The regional exchanges, with their smaller trading facilities, have delayed sending their final transactions to New York until they could catch up with processing the heavy volume of trades, McQuade said.

Instead of sending its final results to New York by about 4:45 EDT, or 15 minutes after its closing, the Pacific exchange has delayed its results until about 5:45 p.m. this week, McQuade said. The other regional exchanges have contributed to the delay, he said.

″They would like us to stay even longer. We just finally shut the system off,″ he said.

As a result, the SIAC system has been unable to provide its closing stock prices at the normal time, about 4:10 p.m. for NYSE and Amex trades and about 4:45 p.m. for consolidated prices that include all regional exchanges.

On Monday, the day of the record 508-point drop in the Dow Jones industrial average, final prices were transmitted on SIAC’s high-speed circuit at about 7:42 p.m., said NYSE spokesman Charlotte Gilbert. On Tuesday and Wednesday it was about 6:15 p.m., she said.

The delays were aggravated by the computerized trading system at the Pacific exchange. The exchange closed down its system for part of Wednesday and Thursday after it overloaded, and buy-and-sell transactions had to be executed manually.

″We’re doing it the old-fashioned way,″ said spokesman Don Alexander.

Automatic Data Processing Inc.’s stock price service to brokers ran up to 12 minutes behind on Monday primarily due to the volume, said Arthur Weinbach, the company’s chief financial officer. He said the service was back to normal Tuesday.

NYSE spokesman Richard Torrenzano said the record volume also has led to more ″questioned trades,″ or errors in the buy or sell prices of transactions reported .

Normally, the error rate is about 2 percent of trades;ch provides stock indexes that are in turn distributed by The Associated Press and other news services.

Standard & Poor’s relies on Automatic Data for the indexes, said Elliott Shurgin, a research manager at S&P. Automatic Data, in turn, relies on the final prices provided by SIAC to double-check its own figures, Shurgin said.

As a result, S&P’s indexes were late Monday, and the company provided only preliminary indexes Tuesday and Wednesday, he said.

The stock market delays also caused problems in reporting mutual fund yields. Some mutual fund tables distributed to newspapers by the AP earlier this week were incomplete due to delays in reporting the yields by the mutual fund managers.

Andrea Pollinger, spokeswoman for Fidelity Investments, said yield results of Fidelity’s mutual funds were late at times earlier this week because of delays in receiving stock prices and questions about the accuracy of the closing foreign stock prices it was given.

Michael Millican, the AP’s business editor, said delays in providing closing stock-price tables to newspapers ranged from about five hours on Monday to about three hours Tuesday and Wednesday to about two hours Thursday.

More than two hours of the delay Monday was due to the late report from the stock exchange, while the rest was due to the extra time it took AP’s computers to process the record volume of transactions, he said. On Tuesday, Wednesday and Thursday, the delay was due in equal parts to the exchange and AP’s computers, he said.

The trades that the AP receives are the raw material for about 900 market listings created and transmitted daily, ranging from short summary tables to the full listings for the stock, bond, commodities and options exchanges.

″The newspaper is seeing a cumulative effect of all the problems along the line handling trading volume that is about twice as high as it ever has been,″ Millican said.

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