Stock Market Week: Rogue trades have had their final day

TODAY, FOR the first time, any late rogue trades on the Stock Exchange's computerised order book will not distort the closing Footsie index.

More than a year after Chancellor Gordon Brown switched on what was to be a highly controversial method of share trading, the Stock Exchange has introduced a system that should iron out the impact of maverick deals.

An impressive regulatory system has been established to counter rogue trades. But they have a habit of occurring towards the stock market close with a consequent disruptive impact on the final and most important Footsie calculation of the day.

Any distortion is usually of relatively minor significance although the 100 Footsie constituents are all traded on the order book. On the only publicly declared occasion when Footsie was recalculated, observers were surprised by the gap that emerged.

The revision occurred on New Year's Eve, a vital day in the investment calendar as it is the cut off date for many portfolio valuations.

Then, a closing 1.5 points gain was adjusted to a 3.2 plus and 11 Footsie constituents had their closing prices revised. Perhaps not an alarming change but big enough to have had a considerable impact in the rarefied world of investment performance.

On a share-by-share basis the new system should end fiascos of the type when two late trades one Friday in July created consternation at Smiths Industries, the aerospace to medical group. The deals, at 711p, were accepted as the closing price; they compared with the more than 750p ruling for much of the day.

On another occasion three Footsie constituents were the subjects of late trades utterly out of line with reality.

There is a suspicion that some trades are deliberately inputted incorrectly to try to establish a favourable position. Other daft deals have been put down to spaghetti-fingered traders. On one occasion one trader actually confused two shares, punching a Cable & Wireless price onto the Imperial Chemical Industries screen. The deal was subsequently cancelled.

However, it is claimed that most of the seemingly daft deals are the fag ends of multi-million pound portfolio trades; the final, often small deal in a string of trades when the price is of little significance to the whole exercise. Derivative-related basket trades, arbitrage and hedging are regarded as the sort of activities responsible for most maverick trades.

Until today the last order book trade represented the basis of a Footsie calculation. Now the new closing price will be an average based on order book deals in the last 10 minutes of trading. The so-called Volume-Weighted Average Price will be the result of dividing the value of trades by the volume. If there are no late transactions the last order book trade will be used as the closing price. Under the new system the Smith Industries closing price would have been 752.75p not 711p.

Off order book trades involving market makers, which are still a large slice of daily business, will continue to be excluded from providing any influence on the blue chip index.

Footsie, in its final week labouring under the old system, had a poor time despite a half-a-percentage point base rate cut and yet another mega deal. It retreated 40.2 points to 5,541.7 and will need a Christmas rally of titanic proportions to achieve some of the heady year-end forecasts which once floated around.

In the Christmas run up there will not be a compelling spread of company results to offer much cheer.

This week the only Footsie constituents in sight are Asda, the superstores chain, and Securicor, the security and mobile phone group.

Judging from the way Asda shares have performed, its interim results will sadly lack any suggestion of festive glow. There is little doubt with consumer spending under pressure Asda, like other retailers, is feeling the pinch and its management, which so successfully rescued the business in the early 1990s, faces its most difficult year.

The shares, down to 23p when Tory bigwig Archie Norman launched the revival, hit 218p in April. Last week they closed at 143.5p.

Profits of around pounds 200m, up from pounds 190m, seem likely but the stock market will be more interested in any clues it is able to get about current trading, particularly the Christmas experience.

Two other hard pressed retailers are on the results schedule. Carpetright and MFI will have particularly woeful tales to tell.

Both have felt the spending slow down. Carpetright is likely to suffer a half-time fall from pounds 16.1m to pounds 12m and MFI, which has suffered the indignity of being expelled from the mid-cap index, could even slip into the red.

Forecasts range from a pounds 6m profit to a pounds 10m loss. Last year the furniture group produced a pounds 35.4m profit.

Securicor's year's profit could emerge at around pounds 100m against pounds 69m. The group's minority shareholding in the Cellnet mobile phone group continues to intrigue with many observers convinced the day is nearing when the controlling shareholder BT buys out the Securicor involvement.

Others reporting include Vaux, the Sunderland group planning to unload its two breweries and 350 bottom-of-the-barrel pubs to concentrate on its hotels and top of the range pubs. Its year's profits should emerge at pounds 42m against pounds 38.3m.

NFC, the transport group which stems from the famous National Freight Corporation management and worker buy-out, has found the going tough lately but should achieve an 8 per cent year's gain to pounds 125m. First Choice Holidays, the packaged holidays group, should manage pounds 48m against pounds 15m.

Leeds, a textile group, also features this week. It has the somewhat dubious distinction of sporting a 17.5 per cent historic yield, despite the promise of a maintained dividend. Although profits are expected to be lower, say around pounds 6m against pounds 8.7m, there is even thought to be a good chance the dividend will be increased from last year's 7p a share total. The shares closed at 51p Friday.

Stephanie first after her public appearance as a woman at Rad Fest 2014

Arts and Entertainment
Banksy's 'The Girl with the Pierced Eardrum' in Bristol
art'Girl with the Pierced Eardrum' followed hoax reports artist had been arrested and unveiled
Oscar Pistorius is led out of court in Pretoria. Pistorius received a five-year prison sentence for culpable homicide by judge Thokozile Masipais for the killing of his girlfriend Reeva Steenkamp
voicesThokozile Masipa simply had no choice but to jail the athlete
Life and Style

Board creates magnetic field to achieve lift

Arts and Entertainment
James Blunt's debut album Back to Bedlam shot him to fame in 2004

Singer says the track was 'force-fed down people's throats'


Endangered species spotted in a creek in the Qinling mountains

Life and Style

Company says data is only collected under 'temporary' identities that are discarded every 15 minutes

peopleJust weeks after he created dress for Alamuddin-Clooney wedding
Life and Style
A street vendor in Mexico City sells Dorilocos, which are topped with carrot, jimaca, cucumber, peanuts, pork rinds, spices and hot sauce
food + drink

Trend which requires crisps, a fork and a strong stomach is sweeping Mexico's streets

ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
George Lucas poses with a group of Star Wars-inspired Disney characters at Disney's Hollywood Studios in 2010

George Lucas criticises the major Hollywood film studios

football West Brom vs Man Utd match report: Blind grabs point, but away form a problem for Van Gaal
Life and Style

Some experiencing postnatal depression don't realise there is a problem. What can be done?

Arts and Entertainment
Gotham is coming to UK shores this autumn
tvGotham, episode 2, review
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Corporate Actions Administrator / Operations Administrator

£25 - 30k: Guru Careers: A Corporate Actions Administrator / Operations Admini...

Customer Service Executive / Inbound Customer Service Agent

£18 - 23k + Benefits: Guru Careers: We are seeking a Customer Service Executiv...

ASP.NET Web Developer / .NET Developer

£60 - 65k + Benefits: Guru Careers: We are seeking a ASP.NET Web Developer / ....

Operational Risk Manager - Asset Management

£60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...

Day In a Page

Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Let's talk about loss

We need to talk about loss

Secrecy and silence surround stillbirth
Will there be an all-female mission to Mars?

Will there be an all-female mission to Mars?

Women may be better suited to space travel than men are
Oscar Pistorius sentencing: The athlete's wealth and notoriety have provoked a long overdue debate on South African prisons

'They poured water on, then electrified me...'

If Oscar Pistorius is sent to jail, his experience will not be that of other inmates
James Wharton: The former Guard now fighting discrimination against gay soldiers

The former Guard now fighting discrimination against gay soldiers

Life after the Army has brought new battles for the LGBT activist James Wharton
Ebola in the US: Panic over the virus threatens to infect President Obama's midterms

Panic over Ebola threatens to infect the midterms

Just one person has died, yet November's elections may be affected by what Republicans call 'Obama's Katrina', says Rupert Cornwell
Premier League coaches join the RSC to swap the tricks of their trades

Darling, you were fabulous! But offside...

Premier League coaches are joining the RSC to learn acting skills, and in turn they will teach its actors to play football. Nick Clark finds out why
How to dress with authority: Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear

How to dress with authority

Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear
New book on Joy Division's Ian Curtis sheds new light on the life of the late singer

New book on Ian Curtis sheds fresh light on the life of the late singer

'Joy Division were making art... Ian was for real' says author Jon Savage
Sean Harris: A rare interview with British acting's secret weapon

Sean Harris: A rare interview with British acting's secret weapon

The Bafta-winner talks Hollywood, being branded a psycho, and how Barbra Streisand is his true inspiration
Tim Minchin, interview: The musician, comedian and world's favourite ginger is on scorching form

Tim Minchin interview

For a no-holds-barred comedian who is scathing about woolly thinking and oppressive religiosity, he is surprisingly gentle in person
Boris Johnson's boozing won't win the puritan vote

Boris's boozing won't win the puritan vote

Many of us Brits still disapprove of conspicuous consumption – it's the way we were raised, says DJ Taylor
Ash frontman Tim Wheeler reveals how he came to terms with his father's dementia

Tim Wheeler: Alzheimer's, memories and my dad

Wheeler's dad suffered from Alzheimer's for three years. When he died, there was only one way the Ash frontman knew how to respond: with a heartfelt solo album