Google Inc. dropped as much as 3.1% and then reversed most of the tumble within a second in a series of transactions that spurred concern the stock was hit by a computerized-trading error.
Google slid as low as $775 in two trades totaling 210 shares at 9:37 a.m. New York time and then recovered most of the loss within the same second, according to data compiled by Bloomberg. The stock had opened the session with a gain, climbing to as high as $803.96. It traded down 0.1% on the day at $798.87 as of 2:20 p.m. in New York.
The decline wasn’t large enough to trigger a trading circuit breaker that would pause Google shares. That would require a drop of 10% in five minutes. The shares are not yet part of a pilot program to test a “limit-up/limit-down” system that will stop trades from occurring at a specified percentage above or below a stock’s rolling five-minute average price.
“I don’t think the seller did this on purpose, it was most likely an error,” Mike Shea, a managing partner at New York- based brokerage firm Direct Access Partners LLC, said in an an e-mail. “The problem with errors in high-priced stocks is that you rarely see the market center bust trades because you rarely see the stock trade up or down the 10% threshold usually required for review and relief.”
Google shares jumped 4.4% on April 19 after the company reported profit that topped analysts’ estimates as advertisers increased spending on mobile and video promotions. The company was fined 145,000 euros ($189,230) by Germany for collecting wireless-network data by its cars taking photos for the Street View service, Hamburg data regulator Johannes Caspar said in an e-mail statement today.
Google slid from $796 to $775 in about three-quarters of a second, then rebounded to $793 a second later, according to a report from Nanex LLC, a market-data firm that analyzes high- frequency trading. The drop involved 307 trades and 57,255 shares from 10 exchanges and dark pools, Nanex said. During the drop, there were five orders placed and then canceled for every trade executed, the firm said.
The 3.1% drop erased about $6.65 billion in the market value of Google’s Class A shares compared with the April 19 close, according to data compiled by Bloomberg. At $264.9 billion, Google is the third-largest company in the world, behind Exxon Mobil Corp. and Apple Inc.
“I think that it may have been a fat finger,” Larry Peruzzi, senior equity trader at Cabrera Capital Markets LLC in Boston, said in an e-mail. “Funny how two years ago this would have been a big issue. Now the market has almost become complacent of these errors.”
Robert Madden, a spokesman for Nasdaq OMX Group Inc., where Google shares are listed, didn’t immediately respond to a phone call seeking comment. Tim Drinan, spokesman for Google, declined to comment.
The Securities and Exchange Commission is seeking to limit technology breakdowns at venues handling stock, options and bond trades and ensure they can withstand malfunctions that could jeopardize markets. Regulators wrote a 373-page rule, called Regulation Systems Compliance and Integrity, after the May 6, 2010, flash crash when the Dow Jones Industrial Average plunged 9.2% before recovering, and last year’s breakdowns that spoiled the initial public offerings by Bats Global Markets Inc. and Facebook Inc.
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