SEC launches probe into NYSE glitch that caused wild price swings trends now
Federal regulators are investigating a glitch at the New York Stock Exchange that drove wild price swings in blue-chip stocks, and resulted in the cancelation of trades in more than 250 securities, including shares of Nike, Verizon and McDonald's.
The NYSE, which is owned by Intercontinental Exchange, said a 'system issue' prevented the opening auctions in a subset of its listed stocks on Tuesday morning.
Those stocks began trading without an opening print, or the price used as the benchmark at the opening bell, causing erroneous pricing that the exchange said will be declared null and void, with the resulting trades canceled.
The US Securities and Exchange Commission said it was reviewing the issue, which experts believe could have cost brokers and small traders tens of millions of dollars.
'Such events are extremely rare, and we are thoroughly examining the day's activity to assure the highest level of resilience in our systems,' said NYSE's Chief Operating Officer Michael Blaugrund in a statement to DailyMail.com.
Traders look at displays for information about a trading malfunction on the floor at the New York Stock Exchange on Tuesday. Federal regulators are investigating a glitch at the exchange that drove wild price swings in blue-chip stocks
Shares of Nike plunged 12% at the opening bell after a glitch on the NYSE prevented the opening auctions of more than 250 listed securities
Blaugrund added: 'We ended the day with a normal market close and expect a regular open on Wednesday.'
A spreadsheet released by the exchange showed 251 affected securities, including shares of Nike, ExxonMobil, 3M, Verizon, McDonald's, Wells Fargo and Walmart.
The glitch is the most recent in a series since the 'flash crash' of 2010, and infuriated traders who were either unable to execute trades at the opening bell, or saw their trades canceled after they executed at erroneous prices.
'What appears to have happened is a technical glitch where all of my opening orders on the NYSE autocancelled even though some of them should have been fulfilled,' said Dennis Dick, trader at Triple D Trading.
'They have corrected that now, but this is going to be a big mess to clean up.'
The exact cost of the fallout from the glitch is unclear, but the cost to brokers and retail traders is likely to be in the eight-figure range, according to a person at a major brokerage who spoke on condition of anonymity because the matter is sensitive.
McDonald's stock plunged 9% in the opening seconds of trading after the 'system error'
A trader is seen during the glitch that caused disruption on the NYSE on Tuesday morning
'Obviously, there were a lot of stocks that had major issues,' said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey. 'It's a bit of a mess.'
Saluzzi said there was 'zero failure tolerance' among traders for glitches at the key open and close of trading.
'This is a failure, there is no sugarcoating it,' said Saluzzi. 'There are definitely people who are losing money today who are not happy.'
The opening auction gaffe comes as the SEC is considering routing most retail stock orders through auctions, with the aim of getting individual investors better prices.
'The SEC's plan to make us all cool and groovy with consumer auctions leaves a lot to be desired,' said James Angel, a finance professor at Georgetown University.
'Auctions are a lot more complicated than it looks. Lots of things can go wrong,' said Angel, who helped work on Nasdaq Inc's auction process.
The NYSE-listed stocks trade on all 16 US stock exchanges, which use the NYSE's prices.
Saluzzi said that having multiple exchanges does not help in a situation like this as the only place to trade an opening order on a New York Stock