NEW YORK: Shares of The Washington Post Co more than doubled on Wednesday, June 16 triggering the first use of a new circuit breaker created after last month's "flash crash" exposed potential flaws in automated trading.
Under the new pilot programme that took effect last week, circuit breakers will temporarily pause trading in any stock that is a component of the Standard & Poor's 500 Index that moves 10% in price in the previous five minutes.
A spokesman for NYSE Euronext, operator of the New York Stock Exchange, confirmed the halt in Washington Post shares was the first to occur under the new circuit breaker rules.
"The halt was triggered by an erroneous trade," said NYSE Euronext spokesman Ray Pellecchia, adding this was the first time the circuit breaker has been activated.
Three trades were canceled within 20 minutes of their occurrence, he said.
"The circuit breaker worked as it was designed to work. It was designed to prevent price volatility or an errant trade to happen at a bad price. This time it was the latter," he said.
A trade of 400 shares of the newspaper's Class B stock shot to $919.18 a share at 3:07:30 p.m. on NYSE Arca, an all-electronic trading platform of NYSE Euronext. A trade of 200 shares at the same price immediately followed.
A third trade of 166 shares at $929.18, or $10 higher than the two previous trades, registered just before the trading halt kicked in, according to Thomson Reuters data.
The trades were coded with a designator of the old Pacific Stock Exchange, which was bought by a predecessor company of NYSE Arca.
The last trade before trading paused was registered at $455.14. Trading resumed a few minutes later.
Analyst Jeffrey Rubin of Birinyi Associates said the share spike was "proof" the new circuit breaker rule would be ineffective at preventing days like May 6, when markets crashed and suddenly recovered in a span of 20 minutes.
Rubin said the flaw in the circuit breaker system is that it does not prevent erroneous trades from happening.
"The new rule is not the correct cure for the disease as the majority of erroneous trades occur immediately following allowable trades and hence the stock is still allowed to trade well in excess of the 10% threshold," Rubin said in a note to clients.
A spokeswoman for The Washington Post declined to comment. ' Reuters
Under the new pilot programme that took effect last week, circuit breakers will temporarily pause trading in any stock that is a component of the Standard & Poor's 500 Index that moves 10% in price in the previous five minutes.
A spokesman for NYSE Euronext, operator of the New York Stock Exchange, confirmed the halt in Washington Post shares was the first to occur under the new circuit breaker rules.
"The halt was triggered by an erroneous trade," said NYSE Euronext spokesman Ray Pellecchia, adding this was the first time the circuit breaker has been activated.
Three trades were canceled within 20 minutes of their occurrence, he said.
"The circuit breaker worked as it was designed to work. It was designed to prevent price volatility or an errant trade to happen at a bad price. This time it was the latter," he said.
A trade of 400 shares of the newspaper's Class B stock shot to $919.18 a share at 3:07:30 p.m. on NYSE Arca, an all-electronic trading platform of NYSE Euronext. A trade of 200 shares at the same price immediately followed.
A third trade of 166 shares at $929.18, or $10 higher than the two previous trades, registered just before the trading halt kicked in, according to Thomson Reuters data.
The trades were coded with a designator of the old Pacific Stock Exchange, which was bought by a predecessor company of NYSE Arca.
The last trade before trading paused was registered at $455.14. Trading resumed a few minutes later.
Analyst Jeffrey Rubin of Birinyi Associates said the share spike was "proof" the new circuit breaker rule would be ineffective at preventing days like May 6, when markets crashed and suddenly recovered in a span of 20 minutes.
Rubin said the flaw in the circuit breaker system is that it does not prevent erroneous trades from happening.
"The new rule is not the correct cure for the disease as the majority of erroneous trades occur immediately following allowable trades and hence the stock is still allowed to trade well in excess of the 10% threshold," Rubin said in a note to clients.
A spokeswoman for The Washington Post declined to comment. ' Reuters
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