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Speer Resigns as Morgan's Specialist Amid NYSE Review

January 08, 1988|From Reuters

NEW YORK — Speer, Leeds & Kellogg has withdrawn as the specialist for J. P. Morgan's stock amid questions about its trading practices in the days after the Oct. 19 crash, the New York Stock Exchange said Thursday.

While most shares gyrated during the plunge and the market's subsequent attempts to recover, the extreme fluctuations of Morgan's shares attracted more attention than most.

The distinguished New York banking company's stock slumped from $41 to $27.75 on Oct. 19. The following day, it rebounded dramatically to $47 before sliding back to close at $35.50.

"Someone made a huge amount of money" because of the share price disparity on Oct. 20, said a Wall Street banking analyst, who asked not to be identified. "Nothing came back the way Morgan came back."

As Morgan's specialist, Speer was responsible for maintaining an orderly market in the bank's shares.

"The specialist is the guy on the floor who runs the books," said a share analyst. "They're supposed to record the bids and asks, and will occasionally use their own capital to close the gap. It's supposed to be relatively orderly."

The NYSE said it had been reviewing Speer's performance on Oct. 20, the day after the crash. It said Thursday that after talks between NYSE officials and representatives from the Wall Street firm, Speer agreed to withdraw as Morgan's specialist.

Speer would not comment on the NYSE announcement, and officials at J. P. Morgan could not be reached Thursday.

Industry analysts said there was something clearly unusual about Morgan's 70% rebound on Oct. 20. "That's a pretty extreme fluctuation for a company the quality of Morgan," said analyst Paul Baastad with S. G. Warburg in San Francisco.

"Morgan is one of the highest quality banks in the United States and it would seem logical that its shares would trade in a relatively orderly way compared to those of other, less stable institutions," Baastad said.

An analyst noted that the inquiry did not reflect badly on Morgan. "In fact, I believe Morgan asked for the investigation."

The NYSE said it will reallocate Morgan's stock to another specialist and will reveal the name next week.

Morgan was in the headlines recently as the bank that, along with Mexican government officials, forged an innovative plan to address Mexico's difficulty in repaying its foreign debt. The plan, in effect, would forgive some of Mexico's debt and set up guarantees for the remainder.

Morgan finished up 12.5 cents at $36.875 in composite NYSE trading Thursday.

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