Human error is to blame for the glitch that caused wild fluctuations in share prices at the start of trading on the New York Stock Exchange on Tuesday.
A NYSE employee who is based out of the exchange’s backup data center in Chicago failed to shut down the disaster-recovery system that is tested every day after the closing bell as part of routine maintenance, according to Bloomberg News.
The backup system, which is meant to be activated in case of disaster, was still running when trading commenced at its usual time of 9:30 a.m. Eastern time on Tuesday.
That tricked the NYSE computers into thinking that the opening bell was simply a continuation of trading.
On normal days, the exchange’s opening auction, which takes place at 9:30 a.m., sets the initial prices of shares that are listed.
But the glitch on Tuesday resulted in wild swings by as much as 25% in the stock price for some 250 companies, including Altria, Mastercard, McDonalds, Uber, Wells Fargo, and Verizon.
Trading of the affected stocks was halted for about 15 seconds and then continued around five minutes later, according to a Nasdaq-run web site that tracks stock halts.
NYSE officials investigated the matter for hours and came away confident knowing what caused the glitch, according to Bloomberg News.
The error caused the NYSE to cancel thousands of trades. The cost of those cancellations has yet to be determined.
The NYSE put out a terse statement on Wednesday which read: “The root cause was determined to be a manual error involving the Exchange’s Disaster Recovery configuration at system start of day.”
Companies listed on the exchange can submit complaints about damages to NYSE management.
The NYSE manages a $500,000 monthly fund intended to compensate brokers in the event of glitches similar to which occurred on Tuesday.
But the mishap left a bad taste in the mouths of Wall Street veterans, including Charles Schwab Corp.
The brokerage firm felt compelled to release a statement on Wednesday blasting the NYSE by name.
“Unfortunately, the NYSE has not owned up to their full responsibility and retail investors will have to go through a lengthy process to correct orders, with no guarantee of a reasonable outcome,” a Charles Schwab spokesperson told Bloomberg News.
“If Exchanges will not accept accountability when they make an obvious mistake, it further heightens our concerns that routing even greater levels of retail orders to the exchanges will dramatically reduce the quality of the investing experience for America’s retail investors,” the spokesperson, Mayura Hooper, said.
The Post has sought comment from NYSE.
[Written in collaboration with other media outlets with information from the following sources]
