Wave of sell orders on NYSE unleashes stock-market chaos

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Sell orders targeting large\u002Dcap stocks swept across U.S. equity exchanges, sending companies to brief but sharp plunges. Read on.

“It’s a little concerning,” Oanda senior market analyst Ed Moya said by phone. “These are not your typical meme stock, easily manipulated companies, these are Morgan Stanley, Verizon, AT&T, these are some of the giants.”

Tuesday’s transactions occurred in New York Stock Exchange-listed securities and took place on other platforms, including ones overseen by CBOE Global Markets and private venues reporting to the Finra trade reporting facility.Article content At least 40 S&P 500 Index stocks were hit with trading halts, according to data compiled by Bloomberg. Other impacted shares included the likes of Walmart Inc. and McDonald’s Corp. These stocks saw drops of at least 12 per cent before they were halted. Their moves have now rebounded to less than one per cent in either direction.

Episodes in which computer glitches lead to erratic pricing are rare on American exchanges but not unheard of. Perhaps the most famous was the August 2012 incident in which faulty software employed by one of the biggest market makers, Knight Trading, riddled exchanges with erroneous orders and sent shares swinging around the market. The event sent Knight spiraling toward insolvency before it was bought out by a coalition of trading firms. Last year, Citigroup Inc.

The start of trading in most American stocks involves a complicated but usually routine process called the opening auction, designed to limit volatility resulting from orders for shares that pile up before the start of the regular session. In it, a computer balances out supply and demand for a particular stock by establishing an opening price that can be viewed as the level that satisfies the largest possible number of traders.

 

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