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Oct 03, 2012

NASDAQ cancels Kraft trades after new glitch

‘Fat-finger’ error led to 28 percent rise in share price in less than a minute

It appears Murphy’s Law has hit NASDAQ following reports that a new glitch forced the electronic exchange to cancel $1.5 mn in trades of Kraft Foods shares.

Kraft shares, which opened yesterday at $45.55, soared by more than 28 percent to $58.54 within a minute of the market’s opening, on its second day of regular trading. Kraft Foods switched from NYSE to a NASDAQ listing after it was spun off from its parent company, renamed Mondelez International, which is also listed on the electronic exchange.

As a result, NASDAQ OMX announced that it was canceling all Kraft trades above $47.82 that occurred between 9.30 am and 9.31 am. Under SEC rules, exchanges are allowed to quickly cancel trades that are ‘clearly erroneous’. NASDAQ attributes the glitch to a single broker error – although the broker was not named – blaming a ‘fat-finger’ order slip-up. This type of mistake is typically due to a trader entering a wrong order size into the system.

The glitch follows a series of high-profile blunders within the electronic trading sphere. In the summer, brokerage firm Knight Capital, the largest US market maker, nearly went bankrupt after losing $440 mn due to a software error.

Last May, technical problems at NASDAQ led to an unexpected and damaging delay in Facebook’s trading debut. In June, BATS Global Markets cancelled its IPO as the company could not get its shares to start trading on its own exchange due to a technical problem.

The SEC has been studying ways to prevent such electronic malfunctions, meeting with executives from high-frequency trading firms whose complex rapid trading technologies have been linked to the recent glitches, reports the Wall Street Journal.

Candice de Monts-Petit

Candice de Monts-Petit

Candice de Monts-Petit joined IR Magazine as a senior editor in 2012. Prior to this, she worked in investor relations, first as an IRO for oil and gas firms in Paris and Moscow and subsequently as an IR consultant in London. She graduated in business...