A surge in trading volumes after the US Securities and Exchange Commission (SEC) banned short selling last week caused glitches on electronic platforms that cancelled thousands of trades, according to a Wall Street Journal (WSJ) report.
Last Friday as traders reacted to the short-selling ban, stocks and exchange-traded funds (ETFs) changed hands on electronic exchanges at "bizarre prices", says the WSJ. Some stocks were more than double previous closing levels while others were at "unnaturally low prices".
The WSJ says exchange officials blamed the erratic trades on unusually high trading volumes and initial confusion surrounding the ban. As a result, thousands of trades that occurred at prices 20% above or below Thursday's close prices were cancelled on electronic platforms operated by Nyse, Nasdaq, Bats Trading and Direct Edge.
Nyse spokesman Ray Pellecchia told WSJ reporters that the Arca platform cancelled around 30,000 trades. Other platform operators declined to provide details of cancelled trades.
Pellecchia said following the short-sales ban market participants were unclear whether they were exempt from the restrictions or not, so people pulled back liquidity they would usually be providing to the market.
"In electronic markets, when there isn't liquidity, trades can go off at aberrant prices," he told the WSJ.