The New York Stock Exchange said Tuesday it would cancel trading in some stocks after problems in the opening auction caused big swings in blue-chip names like ExxonMobil and McDonald’s.
The U.S. Securities and Exchange Commission said it was looking into the issue after the NYSE said a “systems issue” was affecting the opening of about 250 shares.
The exchange said it did not conduct opening auctions for the affected stocks, meaning they began trading without precise “Limit Up Limit Down” bands intended to prevent securities from trading at extreme prices.
The blunder caused some stocks like Wells Fargo to plummet more than 10 percent on market open, while others like AT&T rallied briefly before halting trading. The NYSE said its systems were functioning properly about 20 minutes later, and trades executed outside of proper limits will be declared null and void.
Shares on the Intercontinental Exchange, which owns the NYSE, fell 2.2 percent Tuesday, compared with a 0.1 percent decline in the benchmark S&P 500 index.
NYSE opening auctions use a combination of algorithmic listings and a physical auction managed by human market makers at companies such as Citadel Securities, Virtu and GTS.
The exchange told the market makers that the problems were caused by an internal issue and were not related to anything with the market makers, said three people briefed on the talks.
NYSE Chief Operating Officer Michael Blaugrund said in a statement late Tuesday: “Such events are extremely rare and we are thoroughly investigating the day’s activity to ensure the highest level of resiliency in our systems.” We ended the day with a normal market close and expect a regular open on Wednesday.”
A market maker estimated that more than $1 billion worth of orders were affected, with the volume of shares traded at the open falling nearly 90 percent compared to recent averages.
The SEC said “staff are reviewing the activity and have been in contact with the relevant exchanges,” while an employee at a market maker said he has also spoken to the regulator.
The issue emerged just weeks after the SEC announced plans to route more trading through auction systems on exchanges, and was immediately targeted by opponents of the changes. “The SEC is pushing for all retail order flow to be auctioned off on exchanges. It doesn’t bode well,” said a person involved in the lobbying.
Such a big mistake is rare, but not uncommon for large exchanges, which usually pride themselves on being resilient in the face of unexpected volatility or technical issues.
The head of the Tokyo Stock Exchange resigned in 2020 after a hardware failure disrupted stock trading on the world’s third-largest stock exchange for a full day, while the Toronto Stock Exchange suffered brief outages last November and in the early days of the coronavirus pandemic.
In 2018, the NYSE was fined $14 million by the SEC for a series of issues, including trading disruptions.