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NYSE Trading Outage Impacts $150B Worth Of ETFs

ETF.com Staff

The NYSE Arca—the stock exchange with more than 1,500 ETFs listed on its board—faced a technical glitch late Monday that prevented several ETFs from trading and settling properly at closing.

These ETFs, which, according to the Wall Street Journal, included the SPDR Gold Trust (GLD), the SPDR Dow Jones Industrial Average ETF Trust (DIA), the SPDR S&P Midcap 400 ETF (MDY), the Energy Select Sector SPDR Fund (XLE), the Financial Select Sector SPDR (XLF) and the iShares Russell 2000 ETF (IWM), had a market value of more than $150 billion.

ETFs can trade anywhere throughout the day, but that trading reverts to their listing exchange at closing auction to determine the settlement price for the day. The NYSE said that the issue was caused by a software glitch, and that the exchange had to revert to a previous version of the software until the issue was solved.

Lack Of Proper Settlement

The average retail investor was most likely largely unaffected by the problem unless they were executing a trade at the exact moment of the glitch. Still, Joe Saluzzi, a partner at Themis Trading in Chatham, New Jersey, told the WSJ that these settlement prices are crucial to market makers and traders, and a lack of a proper settlement could impact various trades and hedges.

The NYSE said it offered an alternative closing price using “the volume-weighted average price in the last five minutes of trading,” but Saluzzi told the WSJ he wasn’t sure those settlement prices would be “a better or worse price for the fund.”

NYSE Arca, like other exchanges, tests its software regularly, and a test was conducted Friday, but the glitch still happened Monday. In a letter to clients, the exchange said the following:

“Just after 4 p.m. ET yesterday, it became clear that not all securities had published an Official Closing Price and a small subset of these securities had not conducted a closing auction. Pursuant to our rules, we suspended trading in all securities at approximately 4:13 p.m. ET and canceled all open orders to reduce risk exposure of market participants. Further investigation indicated that 341 symbols did not successfully complete a closing auction.”

Not A Trivial Issue

This type of problem isn’t trivial, and some say it is part of the reason ETF issuers are increasingly diversifying their listing venues. NYSE, which at one point in 2016 commanded some 90% of all U.S. ETF listings, today has about 75% share of all ETFs listings.

“We take our role as market operator very seriously, and we are working tirelessly to ensure that NYSE Arca Equities offers the performance expected by our customers and issuers,” the exchange said.

Trading is back to normal this morning, according to NYSE. 

Contact Cinthia Murphy at cmurphy@etf.com

 

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