Photo: Terra Nova Financial
One persistent rumour is that the initial high-volume trades that caused the market to go haywire on Thursday, prompting the Crash of 2:45, originated somewhere in Chicago.TheStreet.com’s Michael Baron identifies the firm:
The unusual trading action in Procter & Gamble stock believed to be at the centre of the market’s most volatile moments on Thursday is thought to have originated from Terra Nova Financial, a Chicago-based provider of prime brokerage and clearing services, a person familiar with the situation has told TheStreet.
A spokesperson for Terra Nova wasn’t immediately available for comment.
The exact circumstances of the trading action are still unclear. Terra Nova has broker-dealer status with both the Securities and Exchange Commission and the Financial Industry Regulatory Authority, or FINRA. One of the services it offers is sponsored direct market access, which it says allows clients to “establish a direct connection between their proprietary platforms and the Nasdaq or NYSE Arca execution systems,” so the trade — characterised as a large sell order in P&G — could have come from one of the firm’s clients with this type of access.
The article goes onto note that Terra Nova — which trades as a penny stock on the bulletin board under the ticker TNFG — has been subject to major regulatory scrutiny including allegations of naked short-selling, and the allowance of erroenous trades at a high volume.
In its latest 10-K, notes TheStreet, the firm revealed a Wells Notice related to four separate incidents.
Specifically, says the filing:
“NYSE alleges that these trades far exceeded [Terra Nova client] Lee’s buying power, disrupted the market and indicate that Terra Nova failed to establish or maintain appropriate policies or procedures to prevent such erroneous orders from reaching the market.”
Alll that being said… Even if this is true, it’s something of a sideshow to the real question that regulators and the exchanges need to be looking at. Some bad trades in PG (PG) shouldn’t cause hundreds of securities to go nuts and trade at $.01. That the market was so brittle is the problem — not what might have come out of one player in Chicago.