Not Just Oops: Concerns About Technical Glitches

Most people trading yesterday may have noticed any number of market irregularities occurring in Google (GOOG), Rogers (ROG), GE (GE) or other stocks about five minutes before the close.  Take a look at the tick-by-tick chart of Google shown below.

We are only able to highlight one minute of trading, but in the last three minutes of the trading day GOOG ticked as low as $0.01 and as high as $500.  The chart above represents about 1500 trades or about 1.6mln shares, all of which were busted.  The NASDAQ issued a press release saying that any GOOG shares traded below $400.52 and above $425.29 between 3:57 and 4:02 would be broken (GOOG traded as high as $404 at 4:00pm).

There are two significant problems with this kind of a situation. 

1) Over 5000 shares traded above $400.52 at 4:00, what happens to those people who bought low and sold high?  They are stuck with the sale and have to go back into the market and buy stock; probably at a higher price than they sold it.  What occurred in the marketplace to drive the stock down so wildly?  There were rumors of sell programs gone wrong, but are those people are forgiven and their terrible sales wiped away?

2) Google trading down $50 in the blink of an eye is not out of the realm of possibilities.  On 4/18/08 the stock opened up $80.  On 11/08/07 it was down $60 from high to low.  See the chart below of Apple on 10/11/07.

For seemingly unknown reasons the stock traded down about -9.5%.  For comparison, that would have been a decline in Google to $362 yesterday.  The trades in Google were broken, the trades in Apple were not.

Furthermore, these errors occuring in GOOG, GE and ROH occured on the last day of the month and the last day of the quarter.  We are not sure, and there is no proof, but that does raise the question of manipulation for purposes of reporting.

The other part that is very troublesome is that these examples are contained to just one or two stocks daily; what happens if someone's sell program for Dow names goes wrong?

Comments

[Jackson Cash:]

What makes you have any confidence that the same fools running banks aren't the same fools running markets? If there is a crooked opportunity, many will accept it as a "glitch".

Of course there is no transparency nor accountability, only more invisible hand -- what a joke.

2008 Oct 01 10:50 AM

[cyworker:]

I am no expert, but it's been happening to SIRI for a while... just look at September and Aug. trade history and you will find similar pattern daily:
all day trading within band and at end of day a huge transaction at much lower price.

2008 Oct 01 10:50 AM

[googlover:]

Hi, I am one of those that buoght low and sold high and now I am being told that i have to purchase the stocks back at market value. What the hell!!!! is there anyway i can fight this. I did NOT mess up. Why do i have to pay the screw up!?

2008 Oct 01 11:21 AM

[Deuce $:]

You have to pay because the person on the other side of the trade is going to yell a lot more for being sold based on a stop order gone bad.

2008 Oct 01 11:48 AM

[Financial G...:]

It also shows the power of Google over NASDAQ. People panicked because if anyone who is semi-smart would catch on to Google's Top insiders transactions lately they would see Google is going to fail big this Quarter. They think by doing only a couple thousand shares sold every couple days no-one will take notice. I was long Google till I saw this and yes, yesterday more sales. Look at Yahoo insider trades for Google NOT ONE BUY IN A LONG TIME, YET ALOT.... OF SELLS!

2008 Oct 01 12:27 PM

[Jason Rines...:]

Google is a great company and will weather the storm having plenty of cash on hand. I do agree there numbers will be very weak this quarter. Advertising for anything has dropped of the map. I know, because I own a company in Consumer Healthcare marketing and have a dominant position in the data sector of the space. Some saavy entrepenuars are going to begin chipping away at Google's share with a cost-per sale model sharing more risk with an advertising client. The Google model is still decent but the click model and returns do not seem to be profitable for many advertisers at this time. In other words, it's too expensive per click for primary keywords.

2008 Oct 01 12:39 PM

[Financial G...:]

I was one of the people who bought at 370 at 4:59 and sold at @00 at 4:02 and 31 seconds. They went back and gave the person who sold at 370 his shares back while leaving me in a naked short and down alot of money because they made a mistake. The NASDAQ is a joke! OK so maybe I'm over reacting but They should have cancelled all transactions that occured because of their quote mistake. How can they cancel my buy and not the sell? Because I did not make a short and the shares I bought were sold they should either cancel all trades that resulted in this so called glitch or they should say that all trades are valid because someone was willing to sell to us at fire sale prices and is that not how the market works supply/demand? Yes they had mis information, yet how many times do we get fed mis info and they don't let us take back our sales. I think first off people should make a point that the Nasdaq can not decide to cancel some trades they want and not others at the cost off the U.S. public. If that can happen once it could happen again. What if the market were to take a real bad turn, will the Nasdaq just cancel trades they want hours after they were exepted? This is not the 50's, IT WAS THE NASDAQ's MESS UP, THEY SHOULD BEAR THE COST, NOT INNOCENT individual traders who had no fault, yet are now stuck losing thousands.

2008 Oct 01 12:40 PM

[Financial G...:]

I'm still long Google, I agree they will survive and because of their growing market share they will come out of this even stronger and one of the big winners. BUT because google is a growth stock like Rimm and Apple when they miss this quarter there shares will fall hard. Rimm missed by 1 cent and look they lost over 30% in a day. Google will miss the numbers by how much I don't know, but management is selling every couple days so it must be meaningful. After this up coming $ fall I will buy all in and make it my largest holding. I think if you keep a close eye on it you may get shares around 300 maybe even for less during the few minutes that investors are panicking. By this spring Google will be back to test there old high.

2008 Oct 01 12:51 PM

[trader_murf:]

I noticed something similar at the very end of trading in PM on 9/29. I had an order in for 47 something that I put in at 3:45 which wasn't filled by the end of the day. When I checked my account several hours later the closing price was 46.80. There was something on the news about the big trading houses stepping in and taking up all the sell orders because there were no buyers. Okay I am a small buyer but I was a buyer and my order was never filled. Is this incompetence, a technical glitch or are us small investors collateral damage in the big gun games? Also all of this sounds possibly at worst illegal (altho what IS illegal these days?!?!) and at best unethical what can we do? Guess I should be grateful I wasn't on the wrong side of a worse trade but all of this really infuriates me.

2008 Oct 02 10:08 AM