BNY Scrambles To Fix Unresolved ETF "Glitch" By Monday Market Open

Tyler Durden's picture

Last weekend, someone at SunGard Data Systems tried to implement an upgrade to the accounting system that Bank of New York Mellon uses to calculate NAVs for the mutual fund and ETF industries. Well wouldn’t you know it, there was a "glitch" after which something became "corrupted" (so, kind of like what happens inside the Beltway on a daily basis) and so, come Monday, investors couldn’t get accurate assessments of the fair value for the funds. 

Speaking of last Monday, if memory serves us, something notable happened in equity markets... oh, that’s right, the Dow crashed 1,000 points out of the gate in a harrowing bout of flash-crashing, circuit breaker-tripping mayhem and that, according to SunGard, is completely unrelated to the fact that the company still, as of Sunday night, had not calculated NAVs for all of the affected funds.  WSJ has more:

Bank of New York Mellon Corp.’s chief executive warned clients that his firm might not be able to solve all pricing problems caused by a computer glitch before markets open Monday, the latest delay in an unprecedented outage that has frustrated investors and prevented nearly 50 fund companies from providing accurate values for their holdings.


It “has taken far longer than any of us would have expected,” CEO Gerald Hassell said in a Sunday night conference call.


More than 100 employees at the New York company worked through the weekend to correct the glitch and provide up-to-date pricing for roughly 1,200 mutual funds and exchange-traded funds that have lacked accurate asset value figures since last Monday.


Mr. Hassell said BNY Mellon had calculated the net asset values for all funds through last Thursday, with the exception of one company. BNY didn’t name the company. Mr. Hassell told clients that the task would be complete for mutual funds sometime Monday morning but didn’t promise to provide all values before the market opens. Correct prices for exchange-traded funds are expected to be fixed before the open, he said.


The outage has roiled money-management firms that strive to provide investors with accurate pricing for their funds. In its first attempt at quantifying the outage, BNY Mellon said that 20 mutual-fund companies and 26 providers of exchange-traded funds had been affected.


Setbacks in resolving the issue have put BNY Mellon’s reputation on the line, said analysts, likely prompting some clients to at least consider whether to move their business to a rival custodian.


Fund companies affected include Goldman Sachs Group Inc., Guggenheim Investments, Prudential Investments, Federated Investors and Invesco PowerShares. All have had to rely on backup methods for calculating asset values, and are now reconciling the values that they published last week with the new data provided by BNY Mellon.

Got that? Essentially, if you own an ETF or a mutual fund provided by one of the affected companies, there’s no way to be sure that the NAV you’re looking at is accurate. Here’s some color from FT:

When the new values are finally published, mutual fund firms will have to go back to see whether the interim numbers they used to process customer investments and redemptions last week match the final figures.


The impact has been less severe for ETFs because NAVs act only as a guide for investors, who mainly trade their shares on exchanges. [Still] the debacle added to investors’ headaches during last week’s wild market swings, leaving some investors trading on inaccurate information. For example, the PowerShares China ETF published a net asset value that was off by 2.5 per cent.

And a bit more from WSJ:

One money-management firm complained that BNY Mellon has frequently provided status updates while leaving open the most important question for investors, whether the overhaul will be complete and the system functional by Monday.


The problem stemmed from a SunGard Data Systems Inc. accounting system used by BNY Mellon that became “corrupted” last weekend after an upgrade, SunGard said in a statement Thursday.


Mr. Hassell said the bank was informed by SunGard on Aug. 24 that the system would be back up and running that afternoon but “the system did not come back as expected and when it did, it had significant performance issues.” He said that executives still do not know what the “root cause” was. Executives on Sunday night described the SunGard system as “reliable.”

So breaking that down, SunGard told Bank of New York Mellon last Monday that there was a problem, but that it would be solved within hours. Once the system did come back online in had "significant performance issues" which we imagine translates roughly to something like "could not for the life of it figure out what NAV should be given the extraordinary volatility plaguing the market." Here's what a "glitch" looks like (200 funds falling by at least 10% last Monday):

To this day, no one knows what the "root cause" was (we just know it was a "glitch") but we do know that the system is extremely "reliable" - other than the fact that it doesn’t work. 

Now to be fair, no one will ever know precisely what went wrong with the ETF pricing model last Monday, and our guess is that broken, manipulated markets are the root cause of the problem and to the extent that a “glitch” in SunGard’s systems is to blame, we can’t help but think that the sheer chaos which unfolded after the opening bell last Monday might have simply overwhelmed or otherwise confused the system. 

Of course Bank of New York Mellon can’t simply come out and say that broken markets broke its accounting software because that would be to place the blame squarely where it belongs and everyone knows that is a very dangerous thing to do.

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Takeaction2's picture
Takeaction2 (not verified) Aug 31, 2015 7:43 AM

This entire charade is held up by toothpicks...

CrazyCooter's picture

Is there a GLITCH ETF? I want to go long that sucker.



Macchendra's picture

"Fix" as in "The fix is in."

ParkAveFlasher's picture

That stock we told you was $10/share on Monday?  Sorry, we meant to say $.10/share.  Glitch.  You're welcome to sell it, now.

NoDebt's picture

So it's 9:36 now.  Is it fixed?

FireBrander's picture

"investors couldn’t get accurate assessments of the fair value for the funds"

"Fair Value"...that's if anything is "fairly" priced...used car window stickers are probably more honesty marked with a "Fair Value" price than anything Wall Street is selling.

FireBrander's picture

The "next" generation is taking over in the IT departments...more interested in "programming" thier iphones than a business computer system.

The previous generation were IT when IT wasn't cool..they were nerds that loved what they were doing..the next generation just sees $$$ signs.

Wife's work has about 400 employees...they constantly roll out updates to the ENTIRE fucking company all at once...bringing the whole place to it's knees time and again...

detached.amusement's picture

nothing wrong with rolling out to 400 if you have a dev area and test the crap out first

FireBrander's picture

They "test it out" by rolling it out to the 400 and seeing what happens.


Customer calls account number...everything wife needs to see is on one page...they roll out an "upgrade" is now spread across multiple screens through drop down boxes...she has to click back and forth through multiple screens...crushing the network capacity and bringing the system to a "works" great..but crippled efficiency...overpaid morons.

Shit like this never ends...IT CAN'T...because without CONSTANT improvements, the developers wouldn't have anything to do!

Years ago, a company I worked for ran a UNIX system...worked great!...but it wasn't "cool" (green screens)...the execs wanted to "upgrade" to a windows enviroment...what a fucken disaster that was...after two years and a million bucks, they gave up and went back to UNIX..of course, come raise time, they threw us some change because it was a "bad year"...but the execs didn't cancel thier annual Mexican resort "business trip"...fuck them, I left shortly after...

RiverRoad's picture

"Oh what a tangled web we weave when once we practice to deceive...."

New_Meat's picture

How about just meeting the basic requirements and avoiding any fucking "expectations."

"Don't try, DO!"

CHC's picture
CHC (not verified) Aug 31, 2015 7:47 AM

"To this day, no one knows what the "root cause" was (we just know it was a "glitch") but we do know that the system is extremely "reliable" - other than the fact that it doesn’t work."


THAT sums it up beautifully. 

large_wooden_badger's picture

Who needs a root cause anymore? We got glitches!


RaceToTheBottom's picture

All Accounting is and has been broken since 2007.

Valuation and Price discovery are a charade.


FireBrander's picture

"Accounting" is a complete scam.

Generally Accepted Accounting


Principle: "a fundamental truth or proposition that serves as the foundation for a system of belief or behavior or for a chain of reasoning."

No hard rules...bankers..."I propose we are solvent because I believe that someday all of this bad debt on our books will turn good!"

RiverRoad's picture

Reverse all trades back to Dec. 1st 2007!   HA, HA, HA, HA, HA....!!!!!

Winston Churchill's picture

How is BNY even still in biz?

Its a totally criminal organization.The biggest custodian of OPM.


cowdiddly's picture

Yes, they have completely stolen shares from me they claim they can't find but then send  me a div check..

Winston Churchill's picture

Up to their ears in the Linda Green assignment scams as well.

I would'nt let them dogsit for me.

Tyrone Shoelaces's picture

Wow, so another little 'glitch' will send the whole thing over the edge?  LOL this is getting funner and funner!

ZeroPoint's picture

Uh-oh. Does this mean they will have to bring back the trained apes to fight it out in the pit?



Two Theives and a Liar's picture

As said many times here: "Glitches" only seem to occur on down days...never glitches on the way up. I fully expect when "the big one" hits "they" will just pull the plug (and run!).

Hubbs's picture

Yes, and when it really gets FUBAR, they'll  pull the plug also on the internet and Cell service as well.

That's why I got all my Ham ratings -amateur to extra, an Elecraft KX3 rig, various antennas, and SDS 7800 Dragon for super fast PSK 31 transmission.

FireBrander's picture

"That's why I got all my Ham ratings"

Wow! when the shit hits the fan, you, some guy in Brazil, and a Russian in Siberia will have each other to bitch to about the fucked up nature of the world.

How you covered "them" shutting off the electricity?

What if "they" jam short wave freqs?

Hubbs's picture

Need to buy bigger antenna and amplifier for overseas, but right now, many contacts here in continental  Canada and US, just fine, thank you. For now, we discuss the weather.


And too many frequencies to jam, and they will be preoccupied with other matters rather than soime old man gorooving on the radio.

FireBrander's picture

"we discuss the weather." one...glad to see a sense of humor out there even though I jabbed ya!

silverer's picture

Got to have all the algos and numbers in place for an acceptable rollout... and 'Pay no attention to that man behind the curtain'...

Arnold's picture

"We're cutting and pasting code as fast as we can. We may have to call in someone with English as a first language to get it to display right."


--Your H1B servants

Panafrican Funktron Robot's picture

There is a pretty good subset of algos that trade based on a discount/premium to the underlying NAV, so it's not a big leap to assume that this was a contributing factor to last Monday's issues (further, that resets to the underlying NAV may have sparked the "buying panic" later in the week).  

Reichstag Fire Dept.'s picture

What's the NAV of all the physical gold I own? ;) 

Hubbs's picture

How Conveeeeenient!     (Compliments of the Church Lady).

Lolitsa's picture

You can't fix stupid but we sure can string 'em up.

Youri Carma's picture

The Matrix Unglued (2015)

Glitch in the Matrix

NYPoke's picture

This is an interface problem, not a data corruption problem.  Data corrupiton would have been fixec by now.  As it is functional, nobody has a clue when it will be "fixed".  


If they can't roll back to their old system, they are FUBARed.  If 100 people are actually working on this kind of issue, they are REALLY FUBARed.

knukles's picture

Funny all these seeming "coincidences". 
So many of them appearing all of a sudden in the financial/travel/etc., world right along with the improvement in Chinese relations, the US declaring to be preparing trade sanctions/penalties/whatever on China for the cyrpto war they're leading on good old innocent us.

Nah.  Couldn't be could it? Chine would never do that would they?

I'd recommend some of Clarke's books ... rather prophetic.  One starts with a Chinese cyber attack on the gas transmission lines in Boston.  And it all escalates form there.  Fiction, but entirely plausible.  Like Atwood's works.

Lolitsa's picture

"The outage has roiled money-management firms that strive to provide investors with accurate pricing for their funds. In its first attempt at quantifying the outage, BNY Mellon said that 20 mutual-fund companies and 26 providers of exchange-traded funds had been affected."

To all you stupid idiots that I warned about this, you're double dumb if you think this glitch is what they say it is. It's too late now, dummies. Hear that huge sucking sound? That's your hard earned 401ks getting cleaned out.

Ban KKiller's picture

Bank of New York, Mellon. Continuing criminal enterprise. NOW do you get it? 

Sheeesh! Do they have to stick a gun in your ribs for you to figure this out? THEY DON'T USE GUNS ANYMORE! 

Ok, with the exception of nail guns.  AND shitgums. 

Omega_Man's picture

These guys are funny. Can't see what nav value is..... some were right to say get your money out completely from banks... games are starting...

spanish inquisition's picture

Almost every problem with an upgrade I have had in a corporate environment is from not reapplying the old patches to fix previous crappy upgrades.

FireBrander's picture

My "corporate environment" experience is QUANTITY...not Qaulity...oh , yeah, they'll TALK about quality, but what they want is quantity.

People that get 10x more "done" than everyone else are "rewarded" and held up as an example to everyone else...then the shit hits the fan, those "mega-productive" people are used as the scapegoats...get fired...the rest of us try to fix their fuckup...we're one sick society.

"No time to do it right, but all the time in the world to "do it over"...true time and time again!

sopko16's picture

What a hassell! hahah

stant's picture

Go look at the Dow chart for 2001 , spooky