Bonanza Creek’s 19% Surge Canceled as Other Swings Stands
U.S. stock exchanges canceled trades that caused a 19 percent surge in Bonanza Creek Energy Inc. (BCEI) within seconds, while sudden price swings in at least three other securities today were let stand.
NYSE Euronext and Nasdaq OMX Group Inc. said they would break trades in Bonanza Creek that were executed above $39.55 between 3:40 p.m. and 3:41 p.m. today, according to e-mailed notices from the exchanges. Shares of the Denver-based driller jumped from $37.67 to $44.91 in that period after opening at $35.68. They closed at $37.73, up 5.5 percent for the day.
While the decision to cancel the Bonanza Creek transactions came after NYSE Arca Market Management and Nasdaq reviewed them for errors, trades that caused abrupt swings in other shares were untouched. The movements spurred speculation that a brokerage’s computer trading system was experiencing errors as the Standard & Poor’s 500 Index was on its way to a surge of more than 1 percent to a record 1,650.34.
These trades are “more like flash crashes that we see regularly now, just in this it was higher because it was a strong day,” Rick Fier, director of equity trading at Conifer Securities LLC in New York, said by e-mail. His firm oversees $8 billion. “Either way, there was no liquidity to handle the aggressive orders. Back in the day, if you had a fat finger trade you wouldn’t move the market half as much as in today’s markets.”
A series of trades in Pimco Dynamic Income Fund (PDI), an exchange-traded product focused on global credit markets, pushed the security’s price up 6.4 percent from $31.93 at 3:57 p.m. to $33.97 in 26 seconds, according to data compiled by Bloomberg. The ETF erased most of the gain in less than 10 seconds. Total volume for the day was 933,916 shares, the most since March 28.
Shares of Mylan Inc. (MYL) rose more than 3.6 percent within nine seconds at 2:44 p.m., before reversing the gains almost instantly. The trades occurred more than 80 minutes after Bloomberg News reported that Actavis Inc. rejected a cash-and-stock offer from Mylan, according to people familiar with the matter who asked not to be named because the discussions were private.
Johnson & Johnson (JNJ) retreated from $86.40 to $85.88 and then recovered in a matter of seconds at 9:47 a.m.
Sara Rich, a spokeswoman for NYSE Euronext, declined to comment on trading of individual stocks. Robert Madden, a spokesman for Nasdaq, didn’t immediately reply to an email seeking comment.
Exchange rules allow trades to be considered clearly erroneous and broken if the shares move a certain percentage from their last price, among other factors. The threshold is 5 percent for stocks priced between $25 and $50, according to guidelines on the NYSE website.
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