Volatility in Closing Prices Worries S. & P.
By GRETCHEN MORGENSON

Published: January 29, 2004

Shares of Biogen, the biotechnology company, changed hands at an average price of $38.71 with one minute left in the trading session on the Nasdaq stock market on Nov. 12. Then, in the final five seconds, a series of small orders flooded the market, sending the stock up 1 percent.

Sharp swings like this in Nasdaq stocks at the end of the day's trading have raised concerns at the Standard & Poor's Corporation. Worried that the volatile prices are unreliable, the company is planning to announce that it will soon start using American Stock Exchange closing prices for some Nasdaq stocks when it compiles daily movements in its widely followed S.& P. 500-stock index.

"It's clear there are times when there are a lot of concerns about prices on Nasdaq," said David M. Blitzer, chief investment strategist at Standard & Poor's. "Our big concern is the close. I think it offers a real opportunity for mischief."

The Nasdaq stock market has scored some coups recently by luring companies like Hewlett-Packard, the Walgreen Company and the Charles Schwab Corporation to list shares for trading there as well as on the New York Stock Exchange. Still, extreme volatility at the day's end on Nasdaq poses problems for big investors.

Those people who need a firm price on big trades at the end of the day to keep their portfolios in line with the index may be unable to do so in the Nasdaq market. And investors worry that someone who wants to manipulate a stock's price higher at the close, for example, could send in a series of small buy orders that exceed the number of shares for sale, a practice called spraying the market.