Thursday, May 23, 2013

Wall Street's Trading Terror

American Electric Power's Strange, Fast 54% Drop

Bloomberg's Whitney Kisling:
American Electric Power fell as much as $26.31 to $22.28 a share as the market opened today, according to data compiled by Bloomberg. The shares rebounded, trading down 1.6 percent to $47.82 as of 10:21 a.m.
Odd flash-crash on a chart. See it?

Zap! AEP's morning-flash crash
NextEra also crashed in the first minute of trading:

NEE stock slammed in first minute

The New York Stock Exchange will let the odd trading stand, per Reuters:
The share drops were the latest such incidents for the market since the May 6, 2010, "flash crash," a computer-driven trading glitch that caused a sudden afternoon tumble in the major U.S. indexes. Last week, the NYSE canceled trades in Anadarko Petroleum Corp. after a blip in trading cut the market value of the company by 99 percent.
NextEra's CFO reacted strongly:
'This is naturally a concern for all our shareholders and potential shareholders,' said Moray Dewhurst, vice chairman and chief financial officer of NextEra Energy. 'This type of market behavior is not what we would expect from a well-functioning and well-regulated exchange.'
Three ways to look at this:
  1. Glorious -- buying AEP, a $48 stock, or NEE, a $78 stock, at half off.

  2. Painful -- selling these two utility stocks at a 50 percent loss in a blink.

  3. Baffling -- comprehending how the NYSE fails to disallow these wild trades.
Reports say a fix to avoid such strangeness is on its way.

But huge sums of investor monies were involved.

Raising even larger credibility issues.

Look at those two charts, again.

Those long, thin lines. 

They represent mere seconds of trading terror ... happening as fast as a gasp.

Reputations and confidence can be lost quickly.

So, NYSE and the SEC, that's you, your leadership.

Because, ultimately, it's about us, people's investments.

Unless, however, you want Wall Street to be viewed as the Wild West.

Just a couple of flash-crashes, right?

Not a comforting thought.

CNBC's Bob Pisani reports the trades will indeed stand, but be "removed from the tape." Still count. But you won't see them. The worst trades will be hidden.

Still not comforting.

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