“It was a bit of a scramble,” said Justin Wiggs, managing director in equity trading at Stifel Nicolaus. “We had quite a few names affected. But once it got to critical mass where more tickers were impacted, investors got less frantic since they realised it was a bigger problem than just the one ticket they had an issue with.”
Details remain scarce. But if there’s a lesson, it’s avoid market-on-open orders, according to Tuttle.
“Theoretically if they don’t reverse these trades, those are the guys who lose the most,” he said by phone. “It’s making it hard for me right now looking at some of these stocks because there are some highs and lows that just aren’t a part of reality.”
“I would be surprised if some people didn’t end up getting hurt in this. Yes they halted the stocks, but there were trades before the halt and I don’t know what you end up doing about that.”
Matt Tuttle, CEO of Tuttle Capital Management
Computer glitches that lead to erratic pricing and impact trading for a few minutes aren’t unheard of on American exchanges. Perhaps the most famous was in August 2012, when faulty software employed by one of the biggest market makers, Knight Trading, riddled exchanges with erroneous orders and drove swings across the market. Last year, Citigroup’s London trading desk was behind a flash crash that sent shares across Europe tumbling, while in Canada a software-issue caused a 40-minute outage at three stock exchanges.
“I can count on one hand ever since the advance of technology since the early 2000s that something like that has happened at NYSE,” said Kenny Polcari, senior market strategist at Slatestone Wealth who spent four decades at the NYSE. The issue likely affected day traders and those who use algorithmic trading, but not long-term investors, he added.
“If I happened to be in the middle of a trade with NYSE, it would have been rejected, so I would have sent it to a different venue,” he said. “If it had lasted for hours and affected other exchanges, that would be a different issue. But that didn’t happen.”