Trading desks were struck by a lack of confirmation from the Nasdaq on Friday when Facebook shares began pricing and a number of investors have blamed the exchange for the company’s poor first day performance.But new material out of Nanex, a company that provides market data feeds, shows the incredible minute-by-minute impact on Facebook stock and how issues at the Nasdaq moved prices incredibly swiftly.
The details that have emerged — including a 17 second radio outage on the Nasdaq that hit all stocks on the exchange (h/t Zero Hedge) — have embarrassed the exchange and angered investors.
Nasdaq did not respond to repeated request for comment.
First, this is an overview of trading in Facebook's first hour, when shares tested the listing price (11:49 a.m.)
But the reality was trades were hitting in a wide band as communication and matching remained unstable
Because of those discrepancies, trades were executed in a wide range. You'll also notice Nasdaq blasted trades at 12:29 and 12:31 p.m. as its system began delivering updates
Now, lets dive into the first second trading opened (at 11:30:09.206) — circles represent normal trades while triangles represent intermarket sweep orders
Although Nasdaq gave the go-ahead for orders at 11:30, the entire exchange suffered from a radio outage between 11:29:52 and 11:30:09 — which kept trades from printing and delayed the first matches of those trades
Over that hour, trading surged about every 15 minutes between 12:25 through Nasdaq's quoting return at 1:50 p.m.
But then at 1:50:03 p.m. the bid and ask rapidly diverged as more than 12,000 trades are executed — and FB shares collapsed by a dollar
That second of trading was led by the Nasdaq — notice how other exchanges do not react to the same price decline that the Nasdaq is quoting
Why is that? The Nasdaq had stopped delivering quotes at 11:54:17 and stays that way for nearly two hours. The exchange begins quoting shares at 1:50:03, with the exchange tearing through its backlog — and quoting more than 3,000 trades per second
Here is the effect when Nasdaq's quote returned. Over the period there were two quoting gaps (when all exchanges could not quote FB) and one trading gap — the gaps did not coincide with each other. This graph only shows the quote gaps.
Now the trading gap — which occurred after 1:50:03.50, shows huge trade execution in a $1 price range
But something else unexpected happened when Nasdaq blasted quotes and trades through: Trades printed more than 900 milliseconds before quotes (which our friends at Nanex note is an impossibility if orders are being routed according to regulations)
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