The New York Stock Exchange suffered a glitch on Tuesday that led to wild price swings that affected more than 250 stocks, including shares of big companies like Wells Fargo, Verizon and Nike.
Shares of Nike fell more than 12% immediately after trading began at 9:30 a.m. in New York. In less than a second, Verizon swung between a loss of more than 17% and a gain of nearly 13%, while Wells Fargo fell more than 15%.
The moves, which added or erased billions of dollars in market value, led the exchange to halt trading in just over 80 different stocks. Exchanges have built-in “circuit breakers” that automatically halt trading if a stock’s price suddenly swings significantly.
Once trading resumed, company stock prices moved more or less in line with a typical trading day. Shares of Nike, Verizon and Wells Fargo, for example, had gained or lost less than 2% by the end of Tuesday’s session.
The explanation for the turmoil, according to the exchange, was a malfunction in its system at a crucial time for financial markets. Typically, the NYSE holds an opening auction at the start of the trading day, taking orders from buyers and sellers to set the opening price for individual stocks. The exchange said that for some stocks “opening auctions did not take place”, leading to market chaos.
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Sawtooth trading means that some investors will have paid much more to buy shares than the prevailing market price, while others have paid much less. Some investors said their trades were simply not getting executed, with trading volumes drastically reduced. Traders said they expected much of the activity to reverse.
“Someone is having an unhappy day,” said Edward Monrad, head of market structure at Optiver, a so-called market maker, which is a type of business that is supposed to buy and sell stocks to facilitate trading. “These trades will most likely be canceled, which means people are sitting on trades that they’re not sure exist.”
In the afternoon, the NYSE said its member firms could report erroneous trades or seek compensation for losses resulting from Tuesday’s events, in accordance with its rules. The exchange later said that certain trades in more than 250 stocks would automatically be declared “null and void”.
Some investors had previously raised concerns about the scale of the price moves, before the circuit breakers were tripped. Exchanges like the NYSE use what are known as “limit up, limit down” triggers to stop trading in a stock if its price moves too, too quickly.
At the open, this is usually set at 5% or 10% above and below the stock’s opening price. These triggers are designed to protect investors from sudden moves, allowing markets to pause and reset prices before they spiral out of control.
Trade data, however, shows that some trades were executed outside of these ranges.
Tobacco company Altria closed on Monday at a price of $44.81. It opened more than 15% higher on Tuesday at $51.57, which appeared to set the 5% lower trading limit at $48.99. Yet, within milliseconds, trades were executed around $47, $38, $42, $45, and $44 before the price returned to $48.99, according to reported trade data.
Some of those trades were among those the NYSE said it would reverse.
The reversal of trades, however, could create further problems for investors who were unsure whether they had bought or sold stocks, or not. This could also impact trades made on other exchanges affected by NYSE volatility.
. NYSE Glitch led fluctuations wild price stock