Charles Schwab blasts NYSE over stock-trading glitch (From MarketWatch.com)
~ Friday, January 27, 2023 Blog Post ~
By William Watts, January 26, 2023
Retail brokerage Charles Schwab late Wednesday publicly criticized the New York Stock Exchange for its handling of a trading glitch this week that triggered wild price swings, numerous trading halts and thousands of busted trades.
“We are disappointed with the way the NYSE handled their system failure [Tuesday], which they admitted was the result of their own manual error. 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,” Schwab SCHW, -1.46% said in a statement.
The NYSE on Wednesday said the root cause of the Tuesday morning chaos was a “manual error” involving the exchange’s disaster-recovery program.
The NYSE said that as a result of the glitch, trading in 2,824 NYSE-listed securities began Tuesday without attempting to conduct an opening auction. That led to erroneous prices, with the exchange determining that approximately 4,341 trades in 251 symbols should be busted.
Dozens of stocks were briefly halted for volatility after Tuesday’s opening bell. Several stocks showed large opening moves, triggering circuit breakers that automatically halted trade in individual stocks. The halt hit a number of high-profile names, including Morgan Stanley MS, +0.90%, 3M MMM, +0.55%, and McDonald’s MCD, +0.63%. Trading largely returned to normal by 10 a.m. ET on Tuesday.
U.S. Securities and Exchange Commission staff were reviewing the incident, an agency spokesperson said Wednesday. NYSE Chief Operating Officer Michael Blaugrund late Tuesday said such incidents “are extremely rare, and we are thoroughly examining the day’s activity to assure the highest level of resilience in our systems.”
Schwab argued that the incident should lead regulators to rethink proposed changes to stock-market rules that would require brokers to send a large chunk of orders from small investors to auctions. The proposals are part of an SEC effort to ensure smaller investors get better prices on their trades.
“In light of these most recent events coupled with past similar events, we strongly urge the SEC to carefully re-consider the risks of forcing retail orders through unproven auctions on Exchanges,” Schwab said. “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.”
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