Exchanges

NYSE adjusts and busts erroneous options trades

NYSE Euronext has told market participants it will either bust trades or adjust prices for executions involved in an erroneous trading incident on its Amex options platform on 24 February.

Around 31,000 single-lot orders across 450 underlying instruments were affected by the incident, which is believed to have originated from a market-making firm early last Friday.

Staff at the bourse now have finished adjusting or cancelling trades and are now looking more deeply into the cause of the situation, determining if further action is required.

For trades that involved two market makers, NYSE said in a memo that executions would be re-valued at a theoretical price, plus or minus US$0.15 or US$0.30, depending on stock value and whether the order was a buy or a sell.

Where at least one party to an erroneous transaction was not a market maker, the trade will be busted in accordance with NYSE’s rulebook.

The firm said NYSE’s Amex trading platform performed well during the incident and no circuit breakers were triggered.

The NYSE Amex incident bears a resemblance to the infamous ‘flash crash’ on 6 May 2010, when an algorithmic trade for 75,000 e-mini S&P 500 contracts that had no price or time constraints sent market spiralling. Prices for many US equities tumbled by up to 60% in around 20 minutes before rebounding just as quickly.

The Securities and Exchange Commission responded by implementing a new circuit breaker regime and approved a large trader reporting rule that requires firms trading over a certain threshold to report transactions to the regulator.

NYSE completed its purchase of Amex in 2008 for US$260 million.

Anish Puaar +44 (0)20 7397 3817 anish.puaar@thetrade.ltd.uk