The New York Stock Exchange said on Tuesday it would cancel trades in some stocks after problems with the opening auction caused sharp swings in big names such as ExxonMobil and McDonald’s.
The US Securities and Exchange Commission said it was reviewing the issue after the New York Stock Exchange said a “system problem” affected the opening of about 250 stocks.
The stock exchange said it did not conduct opening auctions in those affected Storeswhich means they started trading without the exact “Limit Up Limit Down” ranges, which are designed to stop securities trading at extreme prices.
The error sent some stocks like Wells Fargo down more than 10 percent when the market opened, while others like AT&T rose briefly before trading halted. The NYSE said its systems were working properly after about 20 minutes, and it said trades executed outside the appropriate limits would be declared null and void.
Shares in the Intercontinental Exchange that you own NYSEdown 2.2 percent on Tuesday, compared to a decline of 0.1 percent in the Standard & Poor’s 500.
Opening auctions on the NYSE use a combination of algorithmic bidding and a physical auction run by human market makers at companies like Citadel Securities, Virtu, and GTS.
Three people briefed on the conversations said the exchange told market makers that the problems were caused by an internal issue and not anything to do with the market makers, but did not provide further details.
One market maker estimated that orders were affected at more than $1 billion, with the volume of shares traded at the open down nearly 90 percent compared to recent averages.
“The employees are reviewing the activity and have been in contact with relevant exchanges,” the SEC said, while an employee of one of the market makers said they had also spoken with the regulator.
The problem comes just weeks after the Securities and Exchange Commission announced plans to direct a greater proportion of trades through the exchanges’ auction systems, and opponents of the changes immediately jumped on them. “The SEC is pushing for the flow of retail orders to go to auctions on the exchanges. That doesn’t bode well,” said one person involved in the lobbying effort.
Such a big mistake is rare but not out of the question for the big stock exchanges, which usually pride themselves on being resilient in the face of any unexpected fluctuations or technical issue.
The head of the Tokyo Stock Exchange resigned in 2020 after a hardware glitch halted stock trading on the world’s third-largest exchange for an entire day, while the Toronto Stock Exchange suffered brief outages. last November And in the early days of the coronavirus pandemic.
In 2018, the New York Stock Exchange He was fined $14 million by the US Securities and Exchange Commission (SEC) for a series of problems, including trading interruptions.