--NYSE looking into potentially erroneous trades in 148
securities
--Knight Capital Group examining trading irregularities
--Traders report unusual price moves, heavy volume
U.S. stock traders Wednesday grappled with a wave of orders that
roiled the market and prompted exchanges to halt trading in some
securities, raising concerns that another technology problem may
dent investor confidence.
Knight Capital Group Inc. (KCG) saw its market value decline by
a fifth after it told brokerages to send their orders to other
trading firms, according to people involved in the matter, as
exchanges examined potentially erroneous trading in more than 100
securities.
Traders described unusual price swings in some stocks early in
the trading session amid a large number of buy and sell orders
blasted across electronic trading platforms. Outsized price moves
were seen in shares of RadioShack Corp. (RSH), Quicksilver
Resources Inc. (KWK), Magnum Hunter Resources Corp. (MHR) and Dole
Food Co. (DOLE).
"Down here we're continuing to trade and use all the powers and
rules and regulations we have to make sure trades are executed in
the proper manner," said Jonathan Corpina, senior managing partner
with Meridian Equity Partners, and a floor governor at the New York
Stock Exchange.
Mr. Corpina said that the issue prompted volatility controls to
kick in, pausing some trade. NYSE Euronext (NYX) told traders in a
notice that its staff were reviewing trades in 148 symbols,
executed between 9:30 and 10:15 a.m. Wednesday.
A spokeswoman for Knight said the company was looking into
potential trading irregularities. The Jersey City, N.J. firm is
among the biggest facilitators of stock trading in the U.S.
Knight shares were recently down 17.2% at $8.55 in midmorning
trade Wednesday.
Shortly after the U.S. stock market opened Wednesday, clients of
Knight's trading services, including retail brokerage firms and
institutions, were instructed to send their stock orders elsewhere
due to technical problems, according to people involved in the
situation.
The system error and reports of irregular trading stoked
suspicions that trades had been accidentally duplicated via
computer algorithms, rather than the problem being contained to one
server, as has happened in the past, traders said.
The episode struck on the same day that NYSE Euronext introduced
a new program designed to produce more competitive prices for
retail investors. The so-called retail liquidity program enables
market-makers to offer improvements on stock prices in fractions of
a cent--a new function for stock exchanges.
A spokesman for NYSE Euronext said Wednesday that the system was
functioning properly.
U.S. regulators are already examining whether some other
high-profile stock-market disruptions have been driven by
"glitches" in electronic-trading systems or by more-fundamental
problems with the plumbing of financial markets.
The 2010 flash crash and recent problems surrounding the initial
public offering of Facebook Inc. (FB) have intensified the
regulatory focus on trading systems.
--Steven Russolillo and Jenny Strasburg contributed to this
article.
Write to Jacob Bunge at; jacob.bunge@dowjones.com
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