Glitch on NYSE briefly halts trading in dozens of blue-chip stocks

Glitch on NYSE briefly halts trading in dozens of blue-chip stocks
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The New York Stock Exchange said Tuesday it would cancel trading in some stocks after problems in the opening auction caused big swings in blue-chip names like ExxonMobil and McDonald’s.

The U.S. Securities and Exchange Commission said it was looking into the issue after the NYSE said a “systems issue” was affecting the opening of around 250 shares.

The exchange said it had not held opening auctions in the affected areas Shareswhich means they started trading without precise “Limit Up Limit Down” bands designed to prevent securities from trading at extreme prices.

The blunder caused some stocks like Wells Fargo to plummet more than 10 percent on market open, while others like AT&T rallied briefly before halting trading. The NYSE said its systems were functioning properly about 20 minutes later, and trades executed outside of proper limits will be declared null and void.

Shares in Intercontinental Exchange that owns NYSEfell 2.2 percent Tuesday, compared with a 0.1 percent drop in the benchmark S&P 500 index.

NYSE opening auctions use a combination of algorithmic listings and a physical auction managed by human market makers at companies such as Citadel Securities, Virtu and GTS.

The exchange told market makers that the problems were caused by an internal issue rather than anything to do with the market makers, but gave no further details, said three people briefed on the talks.

A market maker estimated that more than $1 billion worth of orders were affected, with the volume of shares traded at the open falling nearly 90 percent compared to recent averages.

The SEC said “staff are reviewing the activity and have been in contact with the relevant exchanges,” while an employee at a market maker said he has also spoken to the regulator.

The issue comes just weeks after the SEC announced plans to route more trading through auction systems on exchanges, and was immediately pounced on by opponents of the changes. “The SEC is pushing for all retail order flow to be auctioned off on exchanges. It doesn’t bode well,” said a person involved in the lobbying.

Such a big mistake is rare, but not uncommon for large exchanges, which usually pride themselves on being resilient in the face of unexpected volatility or technical issues.

The head of the Tokyo Stock Exchange resigned in 2020 after a hardware failure disrupted stock trading on the world’s third-largest stock exchange for a full day, while the Toronto Stock Exchange suffered brief outages last November and in the early days of the coronavirus pandemic.

In 2018 NYSE was punished $14 million from the SEC over a series of issues including trading failures.

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