The New York Stock Exchange said on Tuesday it would call off trades in some stocks after issues with its opening auction caused wild swings in blue-chip names such as ExxonMobil and McDonald’s.
The U.S. Securities and Exchange Commission said it was looking into the issue after the NYSE said a “system glitch” affected the open of about 250 stocks.
The exchange said it had not held an opening auction on the affected shares, meaning they began trading without precise “Limit Up Limit Down” bands, which are designed to prevent securities to trade at extreme prices.
The error led some stocks such as Wells Fargo to plunge more than 10% as the market opened, while others such as AT&T briefly jumped before trading halted. NYSE said its systems were working properly about 20 minutes later, and said trades executed outside the proper limits will be declared null and void.
Shares of Intercontinental Exchange, which owns NYSE, fell 2.2% on Tuesday, against a 0.1% decline in the benchmark S&P 500 index.
NYSE’s opening auctions use a combination of algorithmic quotes and a physical auction run by human market makers at companies including Citadel Securities, Virtu and GTS.
The exchange told market makers the problems were caused by an internal problem rather than something to do with market makers, but did not provide further details, three people briefed on the conversations said.
A market maker estimated that more than $1 billion worth of orders were affected, with the volume of shares traded at the open down nearly 90% from recent averages.
The SEC said “staff are reviewing the activity and have been in contact with the relevant exchanges,” while an employee of a market maker said he also spoke with the regulator.
The issue comes just weeks after the SEC announced plans to direct a greater proportion of transactions through auction systems on exchanges, and was immediately taken on board by opponents of the changes. “The SEC is pushing for all retail order flow to be auctioned on exchanges. It doesn’t bode well,” said one person involved in the lobbying efforts.
Such an error is rare but not unheard of for major exchanges, which normally pride themselves on being resilient to any unexpected volatility or technical issues.
The head of the Tokyo Stock Exchange resigned in 2020 after a hardware glitch halted stock trading on the world’s third-largest stock exchange for an entire day, while the Toronto Stock Exchange suffered brief blackouts in November last and early in the coronavirus pandemic.
In 2018, NYSE was fined $14 million by the SEC for a series of issues including trading breakdowns.
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