LAST-MINUTE SALES MANIPULATE MARKET.Byline: Floyd Norris  The of this article or section may be compromised by "peacock terms".You can help Wikipedia by removing peacock terms. The New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of Times As the closing bell rang at the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. on Monday, the value of Coca-Cola Co. plunged by $5.6 billion. Just before the bell, Coke traded at $69.75. Then, in the final trade, just a moment later, the price was $67.50. There was no sudden announcement about a plunge in profits or a forecast that the summer would be too cold for many soft drinks to be sold. Nevertheless, there was a flood of sale orders that hit the Big Board to be executed at the final price of the day. That final trade was 1.4 million shares. Coke was not alone in making a big move just as the bell rang. Some others moved up nicely, such as Disney, which added $1.375 at the bell, and Procter & Gamble, which gained $1.50. In fact, it appears that more stocks rose than fell as a result of such last-second action. The Dow Jones industrial average Dow Jones Industrial Average The best known U.S. index of stocks. A price-weighted average of 30 actively traded blue-chip stocks, primarily industrials including stocks that trade on the New York Stock Exchange. was 11.66 points higher as a result of all the final trades. Just what brought on those large orders is open to question. Some, no doubt, were related to the closing of positions in some index options that expire on the last trading day Last Trading Day The final day that a futures or options contract may trade or be closed out before delivery of the underlying asset must occur. Notes: If the buying and selling parties do not arrange an alternate agreement, the physical commodity must be delivered from of each month. And gyrations in smaller stocks may have reflected the fact that the Russell 2000 index Russell 2000 Index An index measuring the performance of the 2,000 smallest companies in the Russell 3000 Index, which is made up of 3,000 of the biggest U.S. stocks. The Russell 2000 serves as a benchmark for small-cap stocks in the United States. was adding new members and deleting old ones, forcing those who run mutual funds based on that index to buy and sell stocks. But some traders, who insisted on anonymity, said they thought that some of the action involved a bit of end-of-quarter performance enhancement. A manager with a big stake in, say, Disney, could put in an order to buy a lot of stock at the close, and see the rising price show up for all the other Disney stock he owns. That could make the quarter look better when performances are compared. Similarly, a manager whose portfolio had some Coke stock, but less than the amount that would be called for if the manager was trying to match the performance of the Standard & Poor's 500, could sell some of that Coke stock. If the sales drove the price down, that would reduce the performance of the S&P 500 by more than it reduced the performance of that manager. And the net effect would be to improve that manager's relative performance. It is possible to put in orders to be executed at the close of trading on any day - so-called market-on-close orders - and the New York and American stock exchanges This is a list of American stock exchanges. Stock exchanges in Latin America (where Spanish and Portuguese prevail) use the term Bolsa de Valores, meaning 'bag' or 'purse' of 'values'. handle them by announcing sizable order imbalances Order imbalance Orders of one kind for a stock not offset by the opposite orders, which causes a wide spread between bid and offer prices. order imbalance well before the close, hoping to draw in offsetting orders. For example, the order imbalance in Coca-Cola on Monday showed a net of 911,000 shares to be sold. To the extent that other buyers do not emerge to take those shares, it is up to the exchange's specialist in that stock to buy the shares. And while in some cases either the specialist or other buyers were willing to offset the imbalance - an imbalance of 278,000 shares to buy in Philip Morris seems to have moved the price by just 6.25 cents - in other cases the price was moved substantially. Specialists are graded in part on how well they avoid market disruptions, which gives them an incentive to step up and take shares without moving the price very much. In some cases, traders who want to buy or sell large blocks may put them in as market-on-close orders, hoping that the orders will be seen as related to some index arbitrage Index Arbitrage An investment strategy that attempts to profit from the differences between actual and theoretical futures prices of the same stock index. This is done by simultaneously buying (or selling) a stock index future while selling (or buying) the stocks in that index. activity, rather than as a trade based on fundamentals. When the specialist gets the price wrong on the final trade - when it is too high or too low for the real state of the market - the stock can be expected to retrace at least part of the distance in coming sessions. Coca-Cola added 50 cents in later trading on the Pacific Stock Exchange on Monday to close at $68 on the consolidated tape Consolidated Tape An electronic system that continuously reports data on the sales volume and price of exchange traded securities. Notes: In contrast to the specific tapes for different exchanges that only record affiliated transactions, the consolidated tape records all , which is the price that newspapers print. And a money manager who manages to make his or her performance look better than it would have, by dint of such a move, is likely to start the new quarter in a hole as the artificial price moves are retraced. But that manager will have three months to get out of that hole. Monday was the deadline for improving relative performance in the second quarter. CAPTION(S): Photo PHOTO (color) Traders conduct their business on the floor of the New York Stock Exchange. Associated Press Associated Press: see news agency. Associated Press (AP) Cooperative news agency, the oldest and largest in the U.S. and long the largest in the world. |
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