Trading in dozens of blue-chip stocks from ExxonMobil to McDonald’s and Mastercard was briefly halted on Tuesday after problems with the New York Stock Exchange’s opening auction caused sharp swings at the start of trading.
The Securities and Exchange Commission said it was reviewing the problem after NYSE said opening auctions did not occur for “a subset” of companies.
NYSE said it was “working to clarify the list” of companies that were affected. More than 75 stocks were stopped for hitting volatility limits within 15 seconds of the open, but one trader added that many more stocks were less severely affected without triggering stops.
Some such as Wells Fargo plunged more than 10 per cent before recovering the bulk of the losses when trading restarted, while others briefly surged. AT&T jumped as much as 14 per cent before reversing to a 1 per cent decline by late morning.
NYSE said its systems were operational about 20 minutes later and that affected companies may be able to claim compensation for losses suffered as a result of the error. Shares in NYSE’s owner Intercontinental Exchange fell 2 per cent on Tuesday, compared with a 0.1 per cent dip in the broad S&P 500 index.
NYSE’s opening auctions use a combination of algorithmic quotes and a physical auction managed by human market-makers at firms such as Citadel Securities, Virtu and GTS.
The exchange told the market makers that the problems were caused by an internal system issue at NYSE, said three people briefed on the conversations.
One market maker estimated more than $1bn worth of orders were affected, with volume of shares traded at the open down almost 90 per cent compared to recent averages.
The SEC said “staff are reviewing the activity and have been in touch with the relevant exchanges”, while one employee at a market maker said they had also spoken with the regulator.
The problem comes just weeks after the SEC announced plans to direct a greater proportion of trades through auction systems at exchanges, and were immediately leapt on by opponents of the changes. “The SEC is pushing to have all retail order flow go to auctions on exchanges. This doesn’t bode well,” said one person involved in the lobbying efforts.
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