Exchanges bust erroneous pre-close AOL trades


U.S. exchanges are now unified in canceling some wild trades in (AOL -3.1%) in a two-minute span just 10 minutes before the close.

The odd trades, traced to a trading firm's mistake, also affected dealing in Nabors (NBR), Lorillard (LO -1.3%), Marathon Petroleum (MPC -0.3%), Canadian Natural Resources (CNQ +0.3%), Nasdaq OMX (NDAQ -0.9%) and Caterpillar (CAT +0.9%), among others -- but those trades will be left standing.

The NYSE will bust AOL trades of $33.17 or below, while Nasdaq, Direct Edge and NYSE Arca will cancel those at $33.16 and below.

Comments (13)
  • Ted Bear
    , contributor
    Comments (701) | Send Message
     
    I love the way they do this...everyone has 'free access' to the market place to do as they wish, but then when they screw it up, they get a Mulligan.

     

    Why not just let them take their own medicine for being dumb and inattentive?
    13 May 2014, 07:38 PM Reply Like
  • phildevoyd
    , contributor
    Comments (204) | Send Message
     
    One day, years ago, I found a bad quote on the New York Bond Exchange. (Remember them?) It persisted for an hour. I didn't know how to contact them, so I hit the offer, and got a confirmation. 2 hours later, they busted the trade. By that time, I had gotten over the rush of a killer trade, and I was thankful that I had not stiffed someone.
    14 May 2014, 08:23 AM Reply Like
  • Dan Naumov
    , contributor
    Comments (358) | Send Message
     
    If I make a trade and it turns out to be a mistake, do I get to cancel it too?
    13 May 2014, 08:42 PM Reply Like
  • deercreekvols
    , contributor
    Comments (9602) | Send Message
     
    And the playing field tilts even more...
    13 May 2014, 08:50 PM Reply Like
  • 1980XLS
    , contributor
    Comments (3360) | Send Message
     
    Use limit orders, those that don't, deserved to be fleeced.
    13 May 2014, 09:38 PM Reply Like
  • King Rat
    , contributor
    Comments (1723) | Send Message
     
    Except for all those with limit orders/stop losses who got taken in the flash crash.
    14 May 2014, 12:13 AM Reply Like
  • Brice Mckalip
    , contributor
    Comments (197) | Send Message
     
    And don't deserve to get their trades busted either.
    How can HFTs say they provide liquidity if the very times I want liquidity (quote far from fair value) are the very times they get to cancel?
    14 May 2014, 12:19 AM Reply Like
  • SivBum
    , contributor
    Comments (2727) | Send Message
     
    Such trades are getting more frequent with those dark pool traders gaming the system. This type of problem is happening more and more. And they wonder why the little guys have left Wall Street.
    13 May 2014, 09:55 PM Reply Like
  • BBBerry
    , contributor
    Comments (31) | Send Message
     
    I need to start making some ridiculous limit buys....

     

    Looking at those graphs, something is truly wrong with how the street works.
    13 May 2014, 11:07 PM Reply Like
  • King Rat
    , contributor
    Comments (1723) | Send Message
     
    People blame this on dark pools, HFT, blah blah blah. Look, Major Tom would be shocked by the errors in this system but rationalizing some major "conspiracy" as an excuse to be out of the market is the best way to ensure that your money will be left behind.
    14 May 2014, 12:18 AM Reply Like
  • SivBum
    , contributor
    Comments (2727) | Send Message
     
    Rat, Quotes from Lewis's book:

     

    Before the flash crash, 67 percent of U.S. households owned stocks; by the end of 2013, only 52 percent did: The fantastic post-crisis bull market was noteworthy for how
    many Americans elected not to participate in it. It wasn’t hard to see why their confidence in financial markets had collapsed. As the U.S. stock market had grown less comprehensible, it had also become more sensationally erratic.

     

    ...

     

    The price volatility within each trading day in the U.S. stock market between 2010 and 2013 was nearly 40 percent higher than the volatility between 2004 and 2006, for instance. There were days in 2011 in which volatility was higher than in the most volatile days of the dot-com bubble.

     

    ...

     

    In early 2013, one of the largest high-frequency traders, Virtu Financial, publicly boasted that in five and a half years of trading it had experienced just one day when it hadn’t made money, and that the loss was caused by “human error.” In 2008, Dave Cummings, the CEO of a high-frequency trading firm called Tradebot, told university students that his firm had gone four years without a single day of trading losses. This sort of performance is possible only if you have a huge informational advantage.

     

    ...

     

    In March 2012 the BATS exchange had to pull its own initial public offering because of “technical errors.” The next month, the New York Stock Exchange canceled a bunch of trades by mistake because of a “technical glitch.” In May, Nasdaq bungled the initial public offering of shares in Facebook Inc. because, in essence, some investors who submitted orders to buy those shares changed their minds before the price was agreed upon—and certain Nasdaq computers couldn’t deal with the faster speeds at which other Nasdaq computers allowed the investors to change their minds. In August 2012, the computers of the big HFT firm Knight Capital went berserk and made stock market trades that cost Knight $440 million and triggered the company’s fire sale. In November, the NYSE suffered what was termed a “matching engine outage” and was forced to halt trading in 216 stocks. Three weeks later, a Nasdaq employee clicked the wrong icon on his computer screen and stopped the public offering of shares in a company called WhiteHorse Finance. In early January 2013, BATS announced that, because of some unspecified computer error, it had, since 2008, inadvertently allowed trades to occur, illegally, at prices worse (for the investor) than the National Best Bid and Offer.
    That was just a sampling from a single year of what were usually described as “technical glitches” in the new, automated U.S. stock markets: Collectively, they had experienced twice as many outages in the two years after the flash crash as in the previous ten.

     

    ...
    14 May 2014, 08:56 AM Reply Like
  • IamHopeful2
    , contributor
    Comments (159) | Send Message
     
    My question is..how were the orders filled? Especially the aol order that was like 10%+ below previous trading prices...
    14 May 2014, 07:18 AM Reply Like
  • JPWHITE
    , contributor
    Comments (10) | Send Message
     
    I was not able to read this message before today = 19 May, Monday. Last I heard, the New York Stock Exchange has FIVE (5) days to correct a trade. I wrote "stock exchange." (( I am not educated about their bond market, nor do I know the rules and policies of other exchanges. )) In all of my decades of working with investors, I have experienced exactly ONE trade correction from the NYSE. ONE!! No kidding!!
    Joan in Houston
    19 May 2014, 05:43 PM Reply Like
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