NEW YORK (Reuters) – A technical glitch at the New York Stock Exchange’s opening auction on Tuesday caused more than 80 shares to be momentarily halted at the start of trading, causing confusion among traders as to which orders were being filled and whether they were being filled case was at the right prices.
The NYSE, which is owned by Intercontinental Exchange Inc (ICE.N), said it is still investigating and that traders may want to consider filing erroneous trade claims. The US Securities and Exchange Commission also announced that it would investigate the matter.
The glitch — the latest in a row since the 2010 “Flash Crash” — impacted stocks of major companies including ExxonMobil (XOM.N), 3M (MMM.N), Verizon (VZ.N), McDonald’s Corp (MCD.N), Wells Fargo (WFC.N) and WalMart (WMT.N). The companies did not immediately respond to a request for comment.
“What appears to have happened is a technical error where all of my opening orders on the NYSE were automatically canceled even though some of them should have been filled,” said Dennis Dick, trader at Triple D Trading.
“You’ve corrected that now, but that’s going to be a big mess to clean up.”
The exact cost of the fallout from the error is unclear, but the cost to brokers and retailers is likely to be in the eight figures, according to a person at a major brokerage firm, who spoke on condition of anonymity because the matter is sensitive.
“Obviously, there were a lot of stocks that had big problems,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey. “It’s a bit messy.”
Saluzzi said there was “zero error tolerance” among traders for disruptions in key trading opens and closes.
“It’s a failure, it can’t be glossed over,” said Saluzzi. “There are definitely people who are losing money today and are not happy.”
The faux pas at the opening auction comes as the SEC is considering routing most retail stock orders through auctions, with the goal of getting better prices for individual investors.
“The SEC’s plan to make us all cool and funky with consumer auctions leaves a lot to be desired,” said James Angel, professor of finance at Georgetown University.
“Auctions are much more complicated than it looks. A lot of things can go wrong,” said Angel, who worked on the Nasdaq Inc (NDAQ.O) auction process.
Stocks listed on the NYSE are traded on all 16 US exchanges that use NYSE prices.
Saluzzi said that having multiple exchanges doesn’t help in such a situation, since the only place an opening order on a stock listed on the New York Stock Exchange can be traded is on the exchange itself.
The NYSE is the only major U.S. exchange still using a trading floor, along with electronic trading, a hybrid model that the exchange says facilitates price discovery during market open, close, and periods of trade imbalance or instability.
Technical errors on exchanges can undermine market confidence.
“I had to place a few discretionary trades but decided to wait another 30 minutes after things seemed to be normalizing to make sure there weren’t any issues,” said Seth Hickle, derivatives portfolio manager at Innovative Portfolios in Indianapolis. Indiana.
To hold exchanges accountable for such disruptions, in 2014 the SEC enacted a comprehensive set of business continuity and disaster recovery rules called Regulation System Compliance and Integrity (Reg SCI).
In March 2018, the NYSE became the first exchange to be fined under Reg SCI. The $14 million fine was related in part to a nearly four-hour halt to trading in July 2015 caused by a flawed software launch.
Steve Sosnick, chief strategist at Interactive Brokers and head trader at Timber Hill, said the fact that the NYSE allows member firms to file lawsuits is “tacit confirmation that there are clients who have been victims of poor or erroneous execution.”
“I don’t recall seeing that many stocks paused on an otherwise normal day,” Sosnick said. “Something went wrong and the NYSE owes us an explanation.”
Reporting by John McCrank, Chuck Mikolajczak, Carolina Mandl and Doyinsola Oladipo in New York, Douglas Gillison in Washington and Medha Singh and Amruta Khandekar in Bengaluru; Edited by Megan Davies, Daniel Wallis and Rosalba O’Brien
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