Split-Second Lurches Affect Stocks From AOL to Caterpillar

A trading firm’s mistake caused wild price swings in U.S. stocks including Caterpillar Inc., AOL Inc. and Nabors Industries Ltd. about 10 minutes before markets closed today, according to people familiar with the matter.

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 before almost immediately 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. The shares were moved by orders tied to the close of trading that were incorrectly entered, said the people, who asked to not be named because the details aren’t public.

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., Lorillard Inc. and Nabors. The most ironic member of the list was Nasdaq OMX Group Inc., which runs U.S. stock exchanges where some of the trades took place.

“Prices definitely didn’t look right,” Thomas Garcia, the head of equity trading at Santa Fe, New Mexico-based Thornburg Investment Management Inc., said by phone today.

Exchanges Investigate

Eric Hunsader, whose Winnetka, Illinois-based Nanex LLC tracks trading disruptions, said 28 U.S. stocks had unusual price moves at 3:49 p.m. New York time. AOL and Nabors saw the biggest moves, according to Nanex.

After reviewing the situation, exchanges canceled some AOL transactions. Trades in the other stocks exchanges reviewed were left intact.

Erroneous equity orders and their impact on markets has 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.

Before it's here, it's on the Bloomberg Terminal.