NYSE's Tuesday trading glitch explained — Why some of the trades may be busted

The New York Stock Exchange experienced method issues astatine the unfastened Tuesday.  Dozens of stocks opened astatine prices good supra oregon beneath their anterior time closing prices. Most were halted soon aft the unfastened nether rules designed to damp down excessive volatility, and astir reopened 5 to 10 minutes aft the unfastened astatine prices overmuch person to yesterday's closing prices.

Stocks affected included large names like Altria, Mastercard, McDonalds, Uber, Wells Fargo, Verizon, Rio Tino, Shell, AT&T, Lilly, Mosaic, Wells Fargo, Nike, Nucor, Transocean, Prudential,3M, Newmont Mining, Southern, United Pacific, Sony, United Parcel Service, Altria, Valero Energy, Occidental Petroleum, Royal Dutch Shell, MetLife, Visa, Walmart, and Exxon Mobil.

The Big Board, owned and operated by the Intercontinental Exchange, aboriginal issued a connection saying "All NYSE systems are presently operational."

Just anterior to 11:00 a.m. ET, the NYSE issued a 2nd statement: "The speech continues to analyse issues with today's opening auction. In a subset of symbols, opening auctions did not occur. The speech is moving to clarify the database of symbols. Impacted subordinate firms whitethorn see filing for Clearly Erroneous oregon Rule 18 Claims."

"Clearly Erroneous" means the NYSE would find that the archetypal prices successful the stocks affected were not valid trades and the NYSE would find that a aboriginal terms would beryllium the "correct" opening price. 

Every day, stocks unfastened astatine the NYSE astatine oregon adjacent 9:30 a.m. ET.  There is lone a azygous opening price, which is determined by thousands of orders to bargain and merchantability idiosyncratic stocks. These orders are aggregated into a azygous "book" for each banal that gauges wide proviso and demand.  A azygous terms is past quoted astatine the unfastened and each orders are aggregated into a azygous opening "auction print."

For immoderate reason, it appears that galore orders to bargain and merchantability stocks did not marque it into the bid publication that determines the opening price, and that the opening auction people did not hap successful those stocks affected.

The effect was that galore stocks opened connected precise debased measurement and owed to a supply-demand imbalance opened astatine prices acold distant from their closing terms Monday.

To springiness 2 examples:  Mosaic closed Monday astatine $48.35, but opened astatine $40.29, a driblet of astir 16%.  It was halted astir immediately, but reopened astatine 9:43 a.m. astatine $48.00.

Walmart closed Monday astatine $142.64 but opened astatine $159.88, a leap of 12%. It, too, was astir instantly halted and reopened astatine 9:40 a.m. ET astatine $141.51.

The NYSE has already hinted it whitethorn bust each the archetypal trades of companies affected erstwhile it said, "Impacted subordinate firms whitethorn see filing for Clearly Erroneous oregon Rule 18 Claims."

This is the astir apt way due to the fact that galore investors who, for example, enactment successful a marketplace bid to merchantability Mosaic astatine the unfastened this greeting were intelligibly burned (it opened down 16%) and would apt endanger lawsuits if not made whole, since the terms driblet had thing to bash with the institution oregon outer events.

Most likely, the "correct" opening terms volition beryllium the terms erstwhile the stocks reopened.

The NYSE has not provided an explanation.  However, successful the past these types of outages person been associated with bundle oregon information upgrades that caused snafus successful the system.

On July 8, 2015, trading was halted for astir 4 hours aft the NYSE experienced what it called  an "internal method issue."   The NYSE aboriginal said, "The basal origin was determined to beryllium a configuration issue."

In a abstracted event, faulty bundle brought down Knight Trading successful August, 2012, successful an incidental which sent tremendous amounts of erroneous orders onto the trading floor.  The incidental forced to Knight to merchantability retired to a radical of trading firms.

"Nine times retired of ten, these problems hap due to the fact that of a bundle alteration successful the system," 1 marketplace subordinate who asked to stay anonymous, told me.