On June 3, EST, a technical failure on the New York Stock Exchange affected the prices of some stocks. Several US stocks are suspected to have abnormal market conditions. Among them, Buffett's$Berkshire Hathaway-A (BRK.A.US)$It was erroneously shown to be down 99%. As of June 3 (up to the temporary suspension of intraday trading due to abnormal fluctuations), the trading volume of this type of stock is less than 4,000; in addition,$Bank of Montreal (BMO.US)$,$Barrick Gold (GOLD.US)$When stocks fell by more than 98%, the market remained static. Currently, Class B shares are trading normally, and the decline has narrowed from about 1.18% to 0.80%. Barrick gold and$NuScale Power (SMR.US)$There was also a dramatic decline.
As of press release, the New York Stock Exchange reported that due to technical problems with the rise and fall, more than a dozen companies, including Berkshire, were unable to properly display stock prices, and were forced to suspend stock trading. Technical issues have now been fixed, and stock trading has resumed. Furthermore, the NYSE decided to cancel any individual Berkshire stock transactions with a trading price of less than $60.3718 million during the period of technical errors.
Sam Van, founder and CEO of SRO Partners, said that technical issues may be related to the US changing the settlement time to T+1. “T+1 has increased the efficiency of market settlement. As the market tries to transition from T+2 to T+1, settlement will be easier for highly liquid companies. However, when it comes to low-liquidity stocks, they may face unexpected challenges. If the market runs too fast and too efficiently, will it also cause the market to crash?”
Sam Van suggests that for market participants in the financial market, in addition to the fact that institutions must be equipped with night operators for critical tasks (such as transaction reconciliation, currency conversion, payment processing) to deal with time zone frictions, smaller regional banks and generations for a smooth transition$Rikei (8226.JP)$Merchants and small companies recommend improving their capabilities to face the challenge before the transition date. At the same time, since settlement is more hastily completed after compressed time, operational risk may increase, which may result in settlement failure.
As to whether Berkshire Class A shares bought during the market crash will be settled, Sam Van said, “Because of the low trading volume, it is relatively easy to cancel the trade because both parties understand each other's transactions.”
Sam worked at the NYSE for more than 10 years, mainly responsible for facilitating initial public offerings of Asian companies listed on the New York Stock Exchange.
In March of this year, the US Securities and Exchange Commission (SEC) made a decision. Starting May 28, the standard settlement cycle for US stock trading will be shortened from T+2 to T+1. This means that if US stock investors sell stocks on the same day, they can receive the relevant funds one working day after the transaction. The SEC said that a shorter settlement window reduces margin requirements for US stock brokers, and that high trading volume or volatility will force US stock brokers to limit trading risks, which will help improve the efficiency of US stock trading.
In 1993, the US Securities Regulatory Commission initially established a standard settlement cycle of three business days (or T+3) for most securities transactions, shortening the common practice of settling securities transactions within five business days after the transaction date at the time. In 2017, the SEC shortened the standard settlement cycle from T+3 to T+2. In a statement announcing the change of settlement time to “T+1,” US Securities Regulatory Commission Chairman Gary Gensler said, “Although the previous transition was successful, the transition to a shorter settlement cycle may lead to a short-term rise in settlement failures and present challenges to a small number of market participants. Despite these expectations, the Securities Regulatory Commission has found that each transition benefits investors and reduces the credit, market, and liquidity risks faced by market participants in securities transactions.”
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