Executives for the New York Stock Exchange Euronext and Nasdaq told a House Finance Committee Tuesday it canceled more than 10,000 trades May 6 when automatic electronic trading computers created chaos during a brief 20-minute gyration.
They said those trades were "clearly erroneous" when their values declined or increased by as much as 99% in value.
Nasdaq Executive Vice President Eric Noll said market executives comprised on a 60% threshold rule to cancel trades above or below their value at 2:40 p.m..and ending at 3 p.m. May 6.
Reuters said those caught within the threshold who lost money on the electronic stop-loss sell orders were furious. The winning investors whose trades were negated complained they should not be punished for stepping in to support the market and help end the steep price slide.
Cause of the glitch remains under investigation by market specialists and government regulators.
The parocess for reviewing the exchanges' policies for canceling trades are being reviewed, said U.S. Securities and Exchange Commission Chairwoman Mary Schapiro. The process must be "fair for investors and consistently applied — both in the context of a single event and across different events," Schapiro said in her prepared testimony for the committee.
The executives did not say what the dollar amount totaled in the canceled trades.
What we are seeing is the old axiom of buying short and selling long taken to a new level. The degree some people go with other peoples money is frightening. Isn't capitalism exciting?
Readers comments are welcome as long as they remain civil. We reserve the right to delete any comments that are vulgar, libelous and totally irrelevant to this posting. -- Jer