Obscure Rule Helps Traders Handle SmithKline Volume

Frenzied trading of SmithKline Beckman options led the Pacific Stock Exchange to invoke a little-used “closing rotation” rule Wednesday to help frazzled traders make sense of the day’s action.

The rule is invoked when an extraordinary level of trading makes it physically impossible for all buy and sell orders to be processed by the time the exchange closes at 1:10 p.m., said PSE spokesman Roy Berces. The closing rotation allows traders to complete after normal business hours any orders that were placed during the day but were not processed by the close of trading, he said.

In all, said Berces, more than 100,000 options contracts were traded on the exchange Wednesday, with orders for SmithKline Beckman contracts accounting for 60% to 70% of the total.

Trading in the Philadelphia drug, medical services and scientific instruments company’s stock has been unusually active for the past week, fed first by speculation that an acquisition was in the making and then by confirmation of merger talks between SmithKline Beckman and London’s Beecham Group.