Trade Error May Wind Up Costing Barclays $4 Million

A trading error at Barclays Plc (BARC) this week caused split-second swings in dozens of U.S. stocks including AOL (AOL) Inc. and Caterpillar Inc. (CAT), according to people familiar with the matter.

Barclays moved the prices of some shares on May 13 after orders tied to the close of trading were incorrectly entered, causing the transactions to be executed immediately, the people said. Barclays clients weren’t affected financially by the error, and less than $4 million is probably at stake, according to one person, who asked to not be identified because the details haven’t been made public.

Kerrie Cohen, a spokeswoman for London-based Barclays, declined to comment.

The mistake whipsawed companies such as AOL, Caterpillar, Nabors Industries Ltd. and Nasdaq OMX Group Inc. According to Winnetka, Illinois-based Nanex LLC, which tracks trading disruptions, at least 28 stocks were affected, with AOL moving the most: a decline of 11 percent. Within a second, prices largely returned to where they’d been before the error.

After reviewing the situation, stock exchanges canceled some AOL transactions. All other trades were left intact.

Knight’s Error

Erroneous equity orders and their impact on markets have received heightened scrutiny since Knight Capital Group Inc. was pushed to the brink of bankruptcy when a computer program went haywire and bombarded exchanges with orders in August 2012. Last year, U.S. Securities and Exchange Commission Chairman Mary Jo White told U.S. market operators to review their rules for canceling transactions.

Caterpillar, which had been trading around $107.12, jumped to an intraday high of $108.21 within a second at 3:49 p.m. New York time on May 13, before sinking back to where it had been. More than $11 million worth of shares changed hands at the elevated levels, according to data compiled by Bloomberg. AOL sank to $32.77, a new low for the day, from around $36.85 at about the same time as about $10 million of shares changed hands. Prices also quickly snapped back.

Other companies with noticeable moves at the same time include Western Union Co., Marathon Petroleum Corp., Canadian Natural Resources Ltd., Avery Dennison Corp. and Lorillard Inc.

To contact the reporter on this story: Sam Mamudi in New York at smamudi@bloomberg.net

To contact the editors responsible for this story: Nick Baker at nbaker7@bloomberg.net Chris Nagi

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