Source: Wall Street See

On Monday, a software update glitch caused chaos at the pre-market trading of USA stocks.

Around 9:45 am local time, trading of about 40 stocks listed on nyse was suspended. At around 9:50 am, more than a dozen trades of Berkshire Hathaway Class A stocks were executed at a price of $185.10, compared to Friday's closing price of $627,400, a drop of almost 100%. Stocks of companies such as Barrick Gold and NuScalePower also experienced similar glitches, and their trading prices were about 99% lower than before.

According to reports, the Consolidated Tape Association (CTA), a subsidiary of nyse that operated the system for consolidated quote handling (SIP) was updating the software that displays the opening price on the SIP.

After about 45 minutes of chaos, CTA resolved the problem by reverting to a backup software version, and all stocks resumed trading at around noon local time.

Subsequently, nyse announced that it had decided to "cancel" all erroneous transactions of Berkshire individual stocks caused by technical problems between 9:50 am and 9:51 am Eastern Time, and any trades with a price lower than or equal to $603,718.30 were canceled. In addition, the exchange made it clear that traders have no right to appeal the decision and hinted at the possible cancellation of transactions of other individual stocks.

This trading glitch is the third unexpected event to occur in the US market in the past week. Last week, a technical issue caused the S&P 500 index to be without real-time prices for more than an hour. In addition, another exchange experienced a glitch two days ago while linking data dissemination.

"We've grown accustomed to operating the exchange without problems for extended periods of time, so when there are several technical problems in a row, it's definitely noteworthy," said Steve Sosnick, chief strategist at Interactive Brokers.

Frequent errors, is T+1 going to be held accountable?

This week, as the US trading settlement cycle shifts from T+2 to T+1, glitches in US stock trading have been frequent.

Starting from May 28th(local time), the US stock trading settlement cycle will be shortened from T+2 to T+1, meaning that investors can receive settlement funds for stocks sold on the same day after one working day of trading.

Previously, the US stock exchange stated that as the settlement cycle is shortened, the market may see an increase in the number of failed settlements in the short term, and brokers and other market participants need an adaptation period to adjust to the faster and more efficient trading processing required by T+1 settlement.

According to Reuters, investors and regulators have been wary of the rising failure rate of trades and other issues since the implementation of T+1 settlement.

However, according to a source cited by the Financial Times, Monday's problem was unrelated to this change.

It is worth noting that the trigger for the transition from T+2 to T+1 settlement in US stocks was the GameStop (GME) event in 2021.

At that time, individual investors represented by GameStop rapidly increased in a short period of time, with trading volume and volatility sharply increasing. In the context of dramatic price fluctuations, brokers needed to provide more margin to cope with settlement risks. T+2 settlement increased the pressure and systematic risks of brokers, prompting regulators and market participants to re-examine the settlement system.

Coincidentally, as nyse experienced technical glitches on Monday, GameStop once again surged, with pre-market trading more than doubling and opening trading reaching a maximum increase of 75%, before closing up 21%.

Editor/Lambor