Yesterday, almost 150 stocks experienced violent price swings between 10:00 and 11:00 AM. We know that the source of the problem was one firm trading in a dark pool, but we don’t know why it all went down (check out a full list of the stocks here, from Nanex).Dark pools (just as a reminder) are private exchanges where investors can trade electronically and anonymously. It’s usually used by big investors so they don’t reveal their positions.
Anyway, the swings affected stocks like Nokia and Pandora — so this was no small deal. When all was said and done 437 bad trades were corrected with different prices and 12 of them were canceled.
Speaking of those corrections,according to Eric Hunsader, an executive at Nanex, a Chicago based firm that tracks market data, they were strange. That’s because the the mistaken trades were rounded beyond 2 decimal places of precision and the corrections were not.
Now Hunsader has more information for us. He says that “almost all of the corrected trades have new prices that differ from the original price by $0.444 which is quite bizarre…. Trades that spiked higher had prices ending with the digit “4”, while trades that spiked lower had prices ending with the digit “6”.”
He added that this was “Not a fat finger. The resulting prices from being off 0.444 would be random.”
That means it was a computer/algorithm issue.
Stay tuned, the more we know, the more you’ll know.