Newspaper article The Christian Science Monitor

Ten Years after Black Monday, Markets Are Stabler New Technology, Regulations, and Beefed-Up Customer Service in Place for Small Investors

Newspaper article The Christian Science Monitor

Ten Years after Black Monday, Markets Are Stabler New Technology, Regulations, and Beefed-Up Customer Service in Place for Small Investors

Article excerpt

The battle cry of Wall Street is, "Never again!"

Financial houses are taking all possible steps to avoid the shocks that helped turn the market downturn of Oct. 19, 1987 into a crash, Wall Street's worst single-day ever.

The Dow Jones Industrial Average plunged 508 points. Half a trillion dollars in paper wealth disappeared. And the 23 percent decline was almost twice the percentage drop on Oct. 29, 1929, the famous crash that helped usher in the Great Depression of the 1930s. "Black Monday" hit small investors particularly hard. Subsequent inquiries confirmed what some average investors had suspected: They had borne much of the loss. While many institutional investors were able to get out of the market as it began to unravel - thanks to computer "program trading" that accelerated the downturn - small investors often found it impossible to get through clogged phone lines to brokers. Some vowed never to invest in stocks again. Now, on the 10th anniversary of the crash, much has changed to put average investors on sounder footing. But if they are better prepared to navigate a crash, they are hardly cushioned against all risk of a repeat. Changes since 1987 include: * Major US investment offices have installed new, high-speed phone lines to handle customer calls. * Customers are encouraged in informational literature to "hang tough" and not sell on the first sign of a downturn. They are also urged to avoid undue euphoria - a point hammered home by Federal Reserve Chairman Alan Greenspan last week. * "Circuit breakers" and program-trading "collars" impede the computer-driven selling that accelerated the 1987 downturn. Exchanges can handle greater volume and are more interlinked to prevent one market from adversely affecting another. * Redemption fees have been imposed at many mutual funds to slow down cashouts. * Discount brokers, who provide instant, computer access to their clients, have taken a growing share of the brokerage business. …

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