Market Breaks on Possible Knight Capital Error
Something went terribly wrong on Wednesday morning within the structure of the stock market, and all signs point to the all too familiar out of control algorithm. Dozens and dozens of symbols made extreme moves on absolutely no news whatsoever. Volume exploded in many of these names as they whipsawed irrationally. In the immediate aftermath, the finger is being pointed at Knight Capital Group (NYSE: KCG) and that stock is being eviscerated on heavy volume in early trading.
At last check, KCG had plunged more than 20% as traders appear to be taking out their frustration by selling the hell out of the likely culprit -- Knight Capital. The firm has reportedly told clients to route trades elsewhere for the time being while it looks into the problem. What exactly happened is still a mystery, but the mayhem inducing algorithm is obvious by looking at the charts of dozens of symbols.
Although most news reports are saying that most of the problems occurred in NYSE stocks, there were some very large swings in NASDAQ listings as well. The New York Stock Exchange is reviewing trades in 148 symbols which occurred between 9:30 and 10:15am EST.
Among the names that traders are saying were effected by the glitch were Goodyear Tire (NYSE: GT), GameStop (NYSE: GME), Manitowoc (NYSE: MTW), Pandora Media (NYSE: P), Level 3 Communications (NYSE: LVLT), Corelogic (NYSE: CLGX), Allegiant Travel (NASDAQ: ALGT) and NuSkin (NYSE: NUS), to name a few.
Joseph Saluzzi, co-head of equity trading at Themis Trading LLC said that it's “yet another example of how the market structure plumbing is responsible for massive price distortions. August 1st will be another day that will destroy investor confidence just like the May 6th flash crash.”
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