A drop of almost 1,000 points in the US’s Dow Jones Industrial Average index yesterday has sparked an investigation from regulators and prompted
stock exchanges to cancel trades.
The Dow Jones slumped to a low of 9,869.62 during Thursday’s trading after opening the day on 10,862.22. It closed the day at 10,520.32, 3.2% lower than the previous day.
The US Securities and Exchange Commission and the Commodity Futures and Trading Commission issued a joint statement yesterday saying they were working with other financial regulators as well as exchanges to review the “unusual” trading activity that took place in the early afternoon. “We will make public the findings of our review along with recommendations for appropriate action,” the statement read.
The Nasdaq Stock Market has resolved to cancel all trades executed between 14.40 and 15.00 greater than or less than 60% away from the consolidated last print in the relevant security at 14.40 or immediately prior. The exchange added that it had coordinated the decision with all other exchanges that trade its stocks on an unlisted trading privileges basis. Similar announcements were issued by NYSE Arca, the electronic trading venue operated by NYSE Euronext, and BATS Exchange.
Nasdaq published a list of almost 300 affected stocks and their break points on its website, while NYSE Arca said more than 170 stocks were affected.
Large swings were evident in stocks such as Proctor & Gamble, which opened the day at $61.91, fell to a low of $39.37, before rebounding to close at $60.95, and consulting firm Accenture, which fell to sub-penny levels before closing at $41.09.
The market is still unsure about what caused the drop, but some reports have blamed a ‘fat-finger’ error. Some suggested that the problem was caused by an erroneous electronic futures trade by Citigroup Global Markets, but US futures and options exchange operator CME Group has issued a statement confirming that “activity by Citigroup Global Markets Inc. in CME Group stock index futures markets does not appear to be irregular or unusual in light of market activity today”.