Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, March 27, 1992 TAG: 9203270426
SECTION: BUSINESS PAGE: A-5 EDITION: METRO
SOURCE:
DATELINE: LENGTH: Medium
NEW YORK - How vulnerable is Wall Street in the computer age?
Traders and regulators pondered that question Thursday after a clerk at Salomon Brothers Inc. bungled a huge computerized trade, causing the sale of millions of dollars worth of stocks and driving down the overall market.
The trade occurred minutes before the closing bell Wednesday on the New York Stock Exchange. It stunned traders and turned a rally into a loss for the day.
Salomon confirmed that a clerk misunderstood a customer order to sell $11 million worth of stock as an order to sell 11 million shares of stock, which has a far greater value. Salomon said the value was "significantly lower" than the $500 million figure circulating among traders.
The order was entered at 3:56 p.m. Eastern time, four minutes before the close. At the time the Dow Jones industrial average was up about 15 points on the day. It finished down 1.57 points.
Before the trade, Quaker Oats Co. was trading at $56 a share. Then came an order to sell 94,200 shares of the stock, and Quaker Oats tumbled to $54.50. About 50 major stocks were involved, including Eastman Kodak Co., Time Warner Inc. and Xerox.
Most computer trading operations include safeguards to prevent erroneous trades, but they depend on human intervention. Salomon said its computer detected the error, but the trade had already begun.
"This is shocking, because you generally think the decision to sell or buy shares of stock is an economic decision," said William Goetzmann, assistant professor of finance at Columbia University's business school. "In this case, that decision was delegated to someone who didn't understand the absurdity of what he or she was doing."
While the same error could have been made by hand, the computerized trade ensured execution within seconds. - Associated Press
Bankruptcy judge warns Hofheimer's
NORFOLK - A federal bankruptcy judge has agreed to allow the Chapter 11 filing of shoe retailer Hofheimer's Inc. to proceed.
However, Judge Hal J. Bonney Jr. has warned that he will move to liquidate the company if its reorganization efforts are unsatisfactory.
Bonney said Hofheimer's executives should keep stores clean and work on renewing confidence of employees and customers. "One store I left yesterday, I was tempted to sweep it out myself," he said. - Associated Press
Apco to redeem $4 million in stock
Appalachian Power Co., a Roanoke-based electric utility, said Thursday it will redeem $4 million of its $2.65 preferred stock on May 1. The stock to be redeemed totals 160,000 shares, or 10 percent of the originally issued shares.
Redemption price is $25 per share and will be paid by check upon presentation of the shares called for redemption. Checks for the quarterly dividend of 66 1/4 cents per share will be mailed separately.
- Staff report
by CNB