Trading in dozens of blue-chip stocks from ExxonMobil to McDonald’s and Mastercard was halted briefly on Tuesday after problems with the New York Stock Exchange’s opening auction led to sharp changes at the start of trading.
The Securities and Exchange Commission said it was looking into the issue after the NYSE said the opening auction did not happen for a “subset” of companies.
The NYSE said it was “working to clarify the list” of affected companies. More than 75 stocks were halted for hitting volatility limits within 15 seconds of the open, but one trader added that many stocks were less affected without a stop trigger.
Some such as Wells Fargo fell more than 10 percent before recovering most of their losses when trading resumed, while others rose quickly. AT&T jumped as much as 14 percent before returning to a 1 percent decline in the morning.
The NYSE said the system was operational about 20 minutes later and that the affected companies may be able to claim compensation for losses suffered as a result of the error. Shares on NYSE owner Intercontinental Exchange fell 2 percent on Tuesday, compared with a 0.1 percent decline in the broad S&P 500 index.
The NYSE opening auction uses a combination of algorithmic quotes and physical auctions managed by human market makers at firms such as Citadel Securities, Virtu and GTS.
The exchange told market makers that the problem was caused by an internal system problem at the NYSE, three people briefed on the conversation said.
One market maker estimated more than $1bn worth of orders were affected, with the volume of shares traded at the open down almost 90 per cent compared to recent averages.
The SEC said its “staff is reviewing the activity and has been in contact with the appropriate exchange”, while one employee at the market maker said it had also spoken to the regulator.
The issue comes just weeks after the SEC announced plans to direct a greater proportion of trades through the auction system on exchanges, and was immediately launched by opponents of the change. “The SEC is forcing all retail order flow to go to auctions on exchanges. This is not good,” said one person involved in the lobbying effort.