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PROGRAM-TRADING GAME MAY COLLAPSE

Now for the good news about program trading:

So many greedy institutional idiots are getting into the act that the game may collapse of its own weight.That's the conclusion of the only serious study made of those infamous computerized practices, which have been frightening millions of small investors away from the market - and causing them, in turn, to lose out on one of history's mightiest bull movements.

The study, which is infinitely more enlightening than the silly whitewash just promulgated by the New York Stock Exchange on behalf of its fat-cat practitioners, has been made by my friend Laszlo Birinyi, formerly the statistics whiz for Salomon Brothers and now head of his own New York firm, Birinyi Associates.

Birinyi is, quite simply, the world's leading objective authority on program trading. His firm tracks it minute by minute, day by day, and his reports have become the standard measurement of this activity.

He gave me, exclusively for this column, two fascinating ways for the small investor to take advantage of the nefarious, market-destabilizing computer games as long as they do continue. We'll get to those techniques in a minute, but first his overall conclusion:

As more and more institutional players seek to get into the act - in which they simultaneously trade huge packages of stocks and futures - the opportunities for such arbitrage are growing ever more slender. "The spreads are not as large as they were even a year ago," Birinyi told me. "We're still seeing an average of three to five programs a day, each involving perhaps $10 million to $25 million, but as the number of players increases, the market inefficiencies and profit opportunities are considerably less than they used to be."

The news that the giant brokerage firms and others that are exploiting program trading for their own accounts may be finding it harder to make an automatic million bucks these days comes as slim comfort to those small investors who have seen the mindless programs send stocks hurtling in one direction or another in a matter of minutes, for reasons unrelated to anything but a supposedly "no risk" computer readout.

But Birinyi is convinced that a smart individual investor can "quit complaining and realize the opportunities program trading provides." His two specific tips:

- Recognize that program trading is causing short-term volatility unrelated to underlying values - and take advantage of it by picking up bargains.

Say you hold a stock you like at $66 a share. Instead of just sitting by and grumbling while programs send its price helter-skelter in a few minutes, place an order with your broker to sell the stock at, say, $68 a share. If a violent "buy" program then sends the market up, take your profit and immediately place an order to repurchase the stock at $66.

You could, of course, lose out if the stock then continues upward. But for someone watching the market closely, and seeing one of those five-min-ute programs hit, it could be a nice way to add some extra change on a semiregular basis.

- Watch the reports on program trading for a reverse clue to where the market really is heading.

Programs by their nature distort the trend. The more they figure in a day's action, the less likely that action is to be long-term significant. For example, when the Dow peaked at 2810 January 2, more than 90 percent of the upside push was caused by programs; the Dow then declined by more than 250 points. It works the other way, too: Heavy program selling on two recent Fridays, May 25 and June 8, was followed by strong market advances on the next trading days. The programs are a marvelous guidepost for wrong-way Cor-rigans.

In a deeper sense, Birinyi is concerned that the programs do continue to cause "damage to the structure of the market over a long period," since they distract attention, talent and resources from fundamental research into individual companies - and, because programs bunch unrelated companies into the same buy-or-sell decision, give a perverse premium to the worst corporate managers.

Meanwhile, though, he thinks the individual investor who coolly concentrates on long-term value can turn these destabilizing institutional games to his advantage - by sticking profitably to his own program.