Curb Futures, Not Programs, Some Declare
NEW YORK -- As program trading comes under renewed attack for causing stock market gyrations, a few people on Wall Street say it is time to consider extreme measures.</br></br>The real answer to curbing wild swings in stock prices, they say, might be to curb or even abolish stock-index futures.</br></br>A stock-index future is a contract to buy or sell the market value of a basket of stocks, such as the Standard & Poor's 500-stock index. Since stock futures were created in 1982, trading on the Chicago Mercantile Exchange and other exchanges has boomed to the point where trading in stock-index futures rivals that in the stocks themselves.</br></br>The conventional view, as voiced by Goldman, Sachs & Co. partner Fischer Black, is that stocks and "derivatives" such as futures and options "form a single market, and that derivatives make it a more liquid market."</br></br>But increasingly, people are questioning that view, and the critics include some of the country's most successful investors. Warren Buffett has been on record as opposing stock-index futures since their inception in 1982. And Mario Gabelli, another star in the investing world, says, "My gut says the negatives of futures and synthetics far outweigh the benefits."