[quote=XBoxBoy]Double check those orders you are hoping got made during the crash…. Looks like they are now talking about cancelling trades that happened during the worst of the crash.
Ironic. That they can “recalculate” what the averages closed at.. This is interesting. Have a bad day? Just blame it on a technical glitch, and rewrite what the averages close at.
The NYSE Arca unit of NYSE Euronext (NYX: 29.85, -1.08, -3.49%) and Nasdaq, as well as other markets, planned to cancel all trades executed at prices that were greater than or less than 60% away from the last printed price prior to 2:40 p.m. Eastern time, up to 3 p.m.
The cancelled trades could change how the major indexes actually closed. For instance, there was a questionable trade in Procter & Gamble (PG: 60.76, -1.39, -2.24%) that many in the market blamed for accelerating the selloff, which, at its nadir, saw the Dow Jones Industrial Average off 998 points. It eventually closed down 347.80 points to close as 10520.32. There were also market rumors that a trader made an erroneous sell order for billions of shares of the e-mini futures traded at the Chicago Mercantile Exchange. CME Group (CME: 321.39, -3.28, -1.01%) said in a statement that its markets functioned properly and without issue.
Under the Nasdaq’s cancelled-trades notice, the P&G stock price would conceivably stand, but furious electronic trading caused several stocks to lose almost all of their paper value. Consulting firm Accenture (ACN: 41.08, -1.11, -2.63%), for instance, started the day at $41.94 a share, but a trade crossed for the stock at just 1 cent a share. That would effectively have wiped out $30 billion in market capitalization in a single trade.
Likewise, energy company Exelon Corp. (EXC: 41.836, -1.844, -4.22%) had a print cross at zero cents, wiping out nearly $29 billion in value.
Both stocks closed with far more modest losses. Neither trade actually crossed at the New York Stock Exchange, where both are listed. Rather, they were traded on electronic platforms.
The frantic selling is sure to revive calls for curbs on what’s known as high-frequency trading, which relies on computerized trades executed within fractions of seconds of either news or trades in other stocks. It is believed that the P&G trade – at $39.37, off an opening price of $61.91 — prompted a steep drop in the value of the Dow, which, in turn, prompted programmed selling that cascaded into a freefall. Within 10 minutes, the Dow Jones Industrials fell close to 700 points – an unheard-of drop for a major stock average. But computers acting on algorithms, rather than traders, were in control of many of the transactions during that period.
Depending on which trades are cancelled, the calculations for the Nasdaq Composite and some of the Standard & Poor’s indexes could be adjusted. Conceivably, if P&G’s questionable trade is also cancelled, the Dow Jones Industrial Average could be recalculated, according to a Dow Jones spokeswoman. That would also mean that, at least from a historical perspective, the indexes never really had such sharp drops.
Still, because of the electronic trading and the steep slide, many stocks likely fell victim to collateral damage and those trades will have to stand.
There were other reasons to sell stocks, outside of the potential for bad trades, notably fears that Europe’s sovereign debt crisis will spiral out of control.
