The Trades That Broke The Nasdaq

During the first minute of trading on January 27, 2014 there were wild price swings in at least 11 stocks: symbols BKH, GEB, HAYN, UBSH, WSBC, FLIC, EFF, GABC, BBOX, SP and TPZ. We know this because about 90 minutes later, Nasdaq canceled trades in these symbols citing the clearly erroneous transaction rule 11890(b). However, as Nanex shows in its usual great (and imperceptible to the SEC) detail, these trades appear anything but erroneous... we can only imagine who the market-maker algo belonged to that the Nasdaq canceled all of these trades...Goldman?

 

Via Nanex,

Un-Clearly Erroneous

During the first minute of trading on January 27, 2014 there were wild price swings in at least 11 stocks: symbols BKH, GEB, HAYN, UBSH, WSBC, FLIC, EFF, GABC, BBOX, SP and TPZ. We know this because about 90 minutes later, Nasdaq canceled trades in these symbols citing the clearly erroneous transaction rule 11890(b).

Pursuant to rule 11890(b), NASDAQ, on its own motion, will cancel all trades executed between 9:30:00 and 09:31:00 that were 10% or greater from the prior day’s consolidated close for the stocks listed below. This decision cannot be appealed. MarketWatch has coordinated this decision with other UTP Exchanges. The stocks affected are as follows: "BKH" at or above $58.66, "GEB" at or above $23.29, "HAYN" at or above $57.26, "UBSH" at or above $26.37, "WSBC" at or above $32.08, "FLIC" at or above $44.70, "EFF" at or above $20.13, "GABC" at or above $31.41, "BBOX" at or above $31.30, "SP" at or below $23.03 and "TPZ" at or above $27.88. NASDAQ will be canceling trades on the participant’s behalf.

Looking closely at the trade and quoting action, we can't help wondering how (other than by price) these trades were clearly erroneous. The trades were within the NBBO (National Best Bid/Offer) which means the highest bid and lowest ask from any of the 10 stock exchanges. Do we need more exchanges? Or is there another problem here?

1. BKH Trades and NBBO (National Best Bid/Offer) spread.
Starting about 2 minutes before market open, the ask prices (sell orders) start walking up from $53.85 all the way to $88.20!



2. BKH Bids and asks color coded by reporting exchange and NBBO.
Ask prices from multiple exchanges all march higher!




3. WSBC Trades and NBBO (National Best Bid/Offer) spread.
The Best Ask was significantly higher, and the best bid was significantly lower just seconds earlier.




4. WSBC Bids and asks color coded by reporting exchange and NBBO.