Knight market-making unit had ‘technical issue’ in early swings

‘Closely Monitoring’

“As is our practice, we are closely monitoring the situation and in continuous contact with the NYSE and other market participants,” Kevin Callahan, a spokesman for the Securities and Exchange Commission in Washington, said in an e- mail.

NYSE employees took steps to stabilize individual stocks when unusual patterns materialized, Jason Weisberg, head of institutional trading for Seaport Securities Corp., said in a telephone interview from the exchange.

“Things were always calm,” Weisberg said. “When the price dislocations were popping up all over the room, exchange officials picked up on the anomalies and put the brakes on. It was happening so frequently and simultaneously they didn’t catch everything, but they caught most very fast.”

Trading was halted on at least six stocks on the NYSE after they tripped so-called “circuit breakers” designed to prevent surges and plunges linked to unusual trading. China Cord Blood Corp. soared more than 150 percent; CoreLogic Inc. fell more than 11 percent; Trinity Industries Inc. rose 17 percent; Kronos Worldwide Inc. climbed 19 percent; and Molycorp Inc. fell almost 18 percent.

Increased Scrutiny

Investors in three of the biggest Dow stocks witnessed repeating fluctuations on July 19, fueling speculation the moves were a consequence of computerized trading. Shares of International Business Machines Corp., McDonald’s Corp. and Coca-Cola Co. swung between successive lows and highs in intervals that began near the top and bottom of each hour.

Regulators have increased scrutiny of computerized strategies that rose to prominence in the U.S. after more than a decade of market structure reform. The Securities and Exchange Commission and Commodity Futures Trading Commission blamed a broker’s algorithm for setting into motion the events that caused the May 6, 2010, market crash that briefly erased $862 billion from U.S. equities in less than 20 minutes.

<< Page 2 of 3 >>
comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome