Why does it always go wrong? "Grass-roots team" NYSE: It really has nothing to do with the US stock market's T+1 change
This trading malfunction is the third incident that has occurred in the US market in the past week, coinciding with the transition from a T+2 to a T+1 settlement cycle
On Monday, a software update glitch caused chaos in the US stock market.
Around 9:45 am local time, trading of approximately 40 stocks listed on the New York Stock Exchange was temporarily halted. By around 9:50 am, several trades of Berkshire Hathaway Class A shares were executed at a price of $185.10, compared to Friday's closing price of $627,400, plummeting nearly 100%. Stocks of companies like Barrick Gold and NuScale Power also experienced similar glitches, with trading prices dropping by about 99%.
It was reported that at the time, the Consolidated Tape Association (CTA), operated by a subsidiary of the New York Stock Exchange, was updating the software that controls the Securities Information Processor (SIP) displaying opening prices.
After about 45 minutes of chaos, CTA resolved the issue by reverting to a backup software version, and all stocks resumed trading by noon local time.
Subsequently, the NYSE announced the decision to "cancel" all erroneous trades of Berkshire stocks caused by technical issues between 9:50 am and 9:51 am Eastern Time, with any trades at or below $603,718.30 being canceled. Furthermore, the exchange made it clear that traders had no right to appeal this decision and hinted at the possibility of canceling trades of other individual stocks.
This trading glitch marks the third unexpected event 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 over an hour. Additionally, another exchange experienced a glitch two days ago in its data feed link.
Steve Sosnick, Chief Strategist at Interactive Brokers, told the media, "We are used to running without exchange problems for long periods, so when several technical issues occur in succession, it is certainly noteworthy."
Frequent Errors, T+1 to Take the Blame?
The week of frequent trading glitches in the US stock market coincides with the transition from a two-day settlement cycle (T+2) to a one-day settlement cycle (T+1).
Starting from May 28th, 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 within one working day after the transaction.
Previously, the US stock exchanges stated that with the shortened settlement cycle, the market may see an increase in the number of failed settlements in the short term, and brokerages 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, since the implementation of T+1, investors and regulatory agencies have been vigilant about the rising failure rate of trades and other issues.
However, a source cited by the Financial Times mentioned that Monday's issue was unrelated to this change.
It is worth noting that the trigger for the transition from T+2 to T+1 settlement in the US stock market was the 2021 GameStop (GME) eventAt that time, retail investors represented by GameStop quickly rose in a short period of time, with trading volume and volatility increasing significantly. In the case of drastic price fluctuations, brokerages need to provide more margin to cope with settlement risks. T+2 settlement has increased the pressure on brokerages and systemic risks, prompting regulatory authorities and market participants to re-examine the settlement system.
Coincidentally, on Monday, when the NYSE experienced a technical glitch, GameStop surged again, doubling in pre-market trading and reaching a maximum increase of 75% at the opening, narrowing to 21% at the close