NYSE to Track Computerized Trades by Hour

In a further attempt to rebuild investor confidence and expose sources of market volatility, the New York Stock Exchange plans to begin disclosing the volume of computerized program trading on an hourly basis, the exchange’s president said Wednesday.

Such disclosure, which might be available by early next year, will go beyond the monthly disclosure of program trading volume now planned by the exchange in response to controversy involving that transaction method, widely criticized for contributing to volatility and the October crash.

However, unlike monthly disclosures, which will begin in mid-August with data from July, hourly disclosures will not reveal the identity of brokerages conducting program trades, said Richard A. Grasso, NYSE president and chief operating officer.

Encourage Scrutiny

“I don’t think anything we’ve done so far can enable us to say to the public that we’ve taken volatility completely out of the market . . . but it has abated,” Grasso said in an interview before a luncheon address to the Los Angeles Junior Chamber of Commerce.

Program trading, usually involving computerized buying or selling by big institutions of “baskets” of stocks in an index such as the Standard & Poor’s 500, accounts for anywhere between 3% and 20% of NYSE volume on any given day, Grasso said. Other market observers, however, say the actual amount is higher.

Public scrutiny resulting from greater disclosure, critics hope, might discourage firms from engaging in program trading, particularly during periods of high volatility. Several large money managers have diverted business away from firms doing program trading for their own accounts.

“Anything that focuses on firms engaging in program trading will be helpful,” said Robert W. Nichols, a leading critic of program trading and president of RNC Capital Management, a Los Angeles money management firm.

The hourly disclosures will be based on tracing of trades through the NYSE’s computers.

However, Nichols said, the disclosures won’t be completely adequate because they will not reveal names of clients that conduct program trading through brokerages. A large volume of program trading is initiated by banks, whose identities will not be revealed under the NYSE initiatives, he complained.