According to Information at NASDAQ OMX all trades which occurred between 2:40 p.m. and 3 p.m. on Thursday were canceled, but only if the trades were significantly more than or less than the price of that security at 2:40 p.m. Information indicates that there were no signs of a technological issue. The stocks affected can be seen here and new stocks may still be added.
So far, 296 stocks have had trades canceled. What could have been a huge buying opportunity became a complete mess, with those trying to sell- or buy – stocks shut out of the process. Of course, most didn’t realize this till later, when the news of the cancellations were announced.
Was Computerized Trading or Human Error to Blame for Sudden 1000 Point Drop on Dow?
At this point, plenty of questions are still being asked. Although rumors swirled that human error was to blame for the drop in the stock market, that has not yet been proven (beyond a shadow of a doubt). However, some sort of glitch seems to have been happened. Before that, the market was down at least 200 points because of investor fear about the Greek debt crisis. This was a historic moment in trading history because it was the largest ever intraday (one day) plunge for the Dow.
At this point, the rumor mill has been fed by reports of a person who accidentally hit the letter b for billions instead of m for millions. While this would be a quick answer to the problem, the situation may be more complex than that. A computer glitch and even rumors of a large hedge fund liquidating shares were also proposed as possible contributors to the Dow drop in share prices.
Perhaps the fault exists in the fact that stock trades don’t go directly to the NYSE (New York Stock Exchange) floor but go straight to electronic exchanges. This could have removed vital safeguards which allowed market makers to intervene and make decisions and moves to prevent drops like the one that occurred on Thursday, April 6, 2010. At this point, this seems to be a key factor in huge drops in stock market prices as well as investor confusion.
Pre-existing Investor Panic not Halted by Drop in Stock Market Prices
One factor that may be at play? Nervous and jittery investors who don’t yet have trust in Wall Street. With the Greek debt crisis already starting off with a rocky day on Wall Street (down 200 points), the sudden drop in share prices may only have fueled the fires. Mistrust may already have been rampant. At one point, Proctor and Gamble stock was nearly worthless. Accenture stock, which had closed at over $0 on Wednesday, went down to one cent on Thursday.
Why Wasn’t There a Complete Halt to Trading?
It’s all in the timing. If a drop happens before 2 p.m., trading is halted. If it had happened between 2 p.m. and 2:30 p.m., trading would have stopped for a half hour, By sheer coincidence, according to reports up to now, the drop started at 2:40 p.m., making it just 10 minutes past the point where trading could have been halted. What a difference those 10 minutes made in the course of a day – and the actions that were taken. Even though trading was halted for a little over a minute at 2:45 p.m., but that only made the situation worse. Computers automatically kept trades at the best price and that led to some amazing one cent trades.
Obama, Congress Seek Answers to Breathtaking Stock Market Plunge, USA Today (update) April 7, 2010 here
NASDAD’s List of 296 ‘Funked Up’ Stocks here
NASDAQ Press Release here