Computer Problem Caused Price Errors on NASDAQ

buckthorn writes "An article running on Yahoo News states: 'A computer problem at an unidentified stock trader caused erroneous, exaggerated prices -- some as high as $950 per share -- to be posted to the Nasdaq Stock Market Friday morning for 1,680 different stocks, a spokeswoman for the Nasdaq said.'"

Profit?

[xiando]

"A metal heat-treating company that normally trades between $3 and $4 per share, was briefly quoted at $951.47 Friday morning. It later traded at $4.10 per share." There IS money in the stock market. Invest $40, sell for $9510. Profit: $9470! Cheers and congratulations.

Re:Friday 13th or why they have rules

[WillAffleckUW]

Well, that's also why there's a 3 day grace period from the order to the close.

It's not just there to allow for slow paper to move, but there to allow rollbacks.

Re:Input Validation?

[Anonymous Coward]

I don't deal with the NASDAQ, but I can tell you that on electronic derivatives exchanges there are often "circuit breakers" that are tripped when certain volitility thresholds are met. The problem with most of these is that they look at a few ticks (quotes or trades) before they go off. So a single erroneous price in the system causes big problems. There is also nothing stopping me from buying a share of apple for $1000 if I so choose. Most likely these trades will be rolled back.

This btw, is not the first time this has happened. Another company that provides direct prices, Bridge, gave quotes of ~400k for a QQQ's (nasdaq index's) which at the time were selling for about $40. Made some people lose (and others gain) a small shitload of money in february.

If you understood financial markets a bit, you would understand that there is no real silver bullet to this problem. Problems occuring from the miskeying in of orders and trades happen all the time. With traders keying in orders every day, they will just click like zombies past any warning screens that they see. I am not saying that the order entry interfaces are perfect, but traders can be a nasty bunch, and they generally HATE anything that impedes the speed at which they can trade or gets in their way.

the unidentified trader was...

[bnitsua]

after some poking around, I believe the unidentified trader was scotttrade. if you use the ticket on their website, it's the only one I've found that reports the incorrect highs (such as maxco being traded for $951.47). you can find other ones if you look hard enough...

Re:83k usd?

[Anonymous Coward]

Yes. Berkshire Hathaway is Warren Buffet's company, and it's noted for the fact that it has never had a share split. Most companies periodically split (or reverse split) their shares to keep the price in some preferred range. But splits are really mostly just paper shuffling, and Buffet doesn't bother.

The introduction of the BRK-B shares smudges the story a bit, though. He does recognize that $83k isn't the most convenient chunk of change to toss around for most people.

Ha ha! Funny stuff

[bigberk]

Believe you me, the NASDAQ is one of the only major exchanges I mildly trust precisely because it is electronic. Other major exchanges, notably the NYSE, involve human floor traders gathering around posts and barking out bid and ask prices.

Do you have any idea how crooked stock trading through middlemen is? There are a thousand ways the retail investor and small trader gets screwed. For instance, market makers are definitely not impartial and favour their own trades ahead of clients'. You can not even catch the fraud the occurs. There are about a dozen NYSE market specialists that are charged with fraud every year.

There is absolutely no reason to involve humans in the securities trading process any more. None! The rampant fraud can be easily avoided. When things like this are publicized, I almost wonder if it's got some bias in favor of the human trade specialists who make trading floor operations tick. They're useless middlemen, profiting from spreads and leverage.

Electronic trading is the only way to go. When an exchange switches to electronic, you should see that as a sign of quality and a commitment to do away with the fraud that EVERY insider knows is a standard mode of operation in stock trading.

Re:its a problem

[Anonymous Coward]

I've worked for a number of banks on various front office trading systems and I can tell you that the risk of major error is an ever present possibility, and in fact many non-US markets will reject orders with prices beyond a prespecified high/low for the day to prevent wild and inadvertant price fluctations or runaway meltdowns.

The quality of trading systems varies tremendously. I've seen some that can easily handle many hundreds of thousands of orders quickly and reliably with a minimum of hardware investment, while others struggle and choke at far less than that while requiring far more boxes to run on and crash several times a year or more during production hours. Much of the codebase in these systems is horrendously bad and its almost impossible to address since the senior managers often got to where they are by rolling out these systems.

Some are incredibly poor