SPY Fell 9.6% Today At the Close to 106.46, WTF?

I was stunned today to see the SPY, which I had been watching only a few minutes earlier show a “print” at the close of 106.46, when it was trading over 118 and change just moments before.  I quickly checked after market trading on the SPY and saw that it was in the 117 range.  Time and sales showed no trades at that price, at the time.  I assumed the 106.46 number must have been an “anomaly”.  I don’t know what the official word will be used to describe the error, but it certainly compounds any remaining concern over the stability and validity of equity markets since the flash-crash in May.

I was at least relieved to see that someone besides myself noticed the error.  Sound like some lucky/unlucky buggers got to buy the SPY at 106.46, albeit for a moment as it looks like the trades were “busted”.

An explaination from Bloomberg is below in its entirety.  More sadly, there have been a number of anomalies since the May flash-crash.  Me thinks the gerbils running the wheel in the old mainframe need to stop smoking pot before 4:30PM.

Oh, and yes I have screen shots, but I left them at work, I will post tomorrow for posterity.  (Update: I’ve posted the screen shots at the bottom.)

NYSE Breaks Trades of S&P 500 ETF at 9.6% Below Opening Price

By Michael P. Regan and Nina Mehta – Oct 18, 2010

A software update at NYSE Euronext’s Arca platform triggered what appeared to be a 9.6 percent plunge in an exchange-traded fund that tracks the Standard & Poor’s 500 Index, a drop that would have erased $7.9 billion from one of the most popular securities in the U.S.

Data published by the electronic venue at 4:15 p.m. New York time showed the SPDR S&P 500 ETF Trust at $106.46 compared with its opening price of $117.74. The apparent plunge in price involved 7.2 million shares in the closing auction on NYSE Arca, according to data compiled by Bloomberg at 4:30 p.m. The S&P 500 rose 0.7 percent to close at 1,184.71 today.

The glitch in the exchange-traded fund, which has a market value of $83.3 billion, comes as federal regulators are trying to restore confidence to equity markets following the May 6 crash that erased $862 billion of share value in 20 minutes. Data showing the decline appeared just as Apple Inc. and International Business Machines Corp. were releasing quarterly profit statements.

“It was a mess and it was alarming that it could happen,” said Andrew Ross, a partner and global equity trader for First New York Securities LLC, who trades ETFs. “People were very focused on after-market trading because of IBM and Apple earnings so it was very confusing when the price discrepancy happened. But people quickly recognized it was a bad print.”

Auction Glitch

NYSE Arca said the ETF’s official closing price will be recorded as $118.28, a 0.5 percent gain from its Oct. 15 close. The exchange operator said its 4 p.m. closing auction in securities listed on NYSE Arca was delayed for 15 minutes because of an issue with a software release. Auction prices occurring at 4:15 p.m. will be the official closing price for all other securities except for the SPDR S&P 500 ETF.

NYSE Arca will “bust” all the $106.46 trades, according to an e-mail from exchange spokesman Raymond Pellecchia. The fund managed by State Street Global Advisors is one of the most heavily traded securities in the U.S., averaging 112.2 million shares a day this year, data compiled by Bloomberg show.

“The issue has been resolved,” Pellecchia said in an interview. “Operations will be normal tomorrow.” Marie McGehee, a spokeswoman for State Street Corp., declined to comment.

Trading in another security linked to the S&P 500, the E- Mini futures contract traded on the Chicago Mercantile Exchange, helped start the May 6 crash that briefly sent the Dow Jones Industrial Average down 998.5 points, according to regulators. A mutual fund company’s automated sale of the contract without regard to price and “hot potato” trading by computer-driven firms set off the rout, according to the Securities and Exchange Commission and Commodity Future Trading Commission report.

Algorithmic Trading

The 104-page study released Oct. 1 said trading software known as an algorithm linked the rate at which it traded the E- Mini contract to overall market volume. The initial sales spurred a flurry of buying and selling among high-frequency traders, which in turn led the algorithm to sell faster.

SEC Chairman Mary Schapiro is trying to protect investors in a fragmented U.S. stock market while maintaining liquidity on exchanges dominated by firms that profit from computerized trading. The May crash prompted exchanges to implement circuit breakers that pause trading in more than 1,300 securities during periods of volatility. Uniform policies for canceling trades and eliminating stub quotes, or bids and offers at prices far away from the stock’s last sale, have also been proposed or adopted.

Other Busted Trades

Nasdaq canceled more than 50 trades in Progress Energy Inc. on Sept. 27 after the shares plunged 90 percent, triggering stock circuit breakers imposed after the May 6 crash. The exchange cited an “inaccurate limit price entered by a trading firm” for the mistaken transactions.

Two weeks earlier, a 100-share order for Nucor Corp. that triggered a 99.98 percent decline was canceled by the CBOE Stock Exchange. Nucor fell from $35.71 to 1 cent on the voided purchase, data compiled by Bloomberg show.

About 200 trades in Core Molding Securities Inc. were canceled on Aug. 26 after the stock plunged from above $4 to below a penny in two seconds after going untraded for the first 4 1/2 hours of the day. NYSE Amex, the Nasdaq Stock Market and Nasdaq’s BX platform canceled all trades at or below $3.94.

To contact the reporters on this story: Michael P. Regan at mregan12@bloomberg.net; Nina Mehta in New York at nmehta24@bloomberg.net.

To contact the editor responsible for this story: Chris Nagi at chrisnagi@bloomberg.net

October 18, 2010 SPY After the Close (from Google)

October 18, 2010 SPY After the Close (from Google)

October 18, 2010 SPY After the Close (from Yahoo)

October 18, 2010 SPY After the Close (from Yahoo)

October 18, 2010 SPY After the Close (from Finviz)

October 18, 2010 SPY After the Close (from Finviz)

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