The exchange said transactions in a swathe of stocks will be reviewed as “clearly erroneous” under NYSE rules. That applies to trades in certain securities that did not conduct an opening auction, that occurred after the 9.30am bell but before certain thresholds were set that normally limit haywire swings, and that were executed too far from the reference price.
“Such events are extremely rare, and we are thoroughly examining the day’s activity to assure the highest level of resilience in our systems,” NYSE chief operating officer Michael Blaugrund said. “We ended the day with a normal market close and expect a regular open on Wednesday.” The freakish action bore hallmarks of past episodes in which computer malfunctions led to sudden price distortions. A US Securities and Exchange Commission spokesperson said the agency is looking into the matter.
The distortions ripped through trading of Morgan Stanley, which closed on Monday at $97.13 and then fell as low as $84.93 on Tuesday, before making up lost ground. Wells Fargo similarly plunged to $38.10, down from $45.03 on Monday, before bouncing back. The NYSE’s statement makes reference to a system in the US stock market designed to thwart mistaken trades known as “limit up/limit down”. It halts trading when stocks swing drastically from prevailing prices, levels that computers calculate by keeping a rolling record of average transactions over five-minute intervals. At the start of trading, when no such average is available, a price from the opening auction is normally substituted.