A number of mistaken orders received by the New York Stock Exchange among others came from Goldman Sachs Group Inc. (NYSE:GS) according to the latest news from The Wall Street Journal. The mistaken orders, which were received between 9:30 and 9:47 EST were made because of errors in trading software.
Goldman Sachs Group Inc. (NYSE:GS) notified regulators about the technical problem that caused the erroneous trades, and the investment bank released a statement that admitted the mistaken trades came from their business. Earlier today NYSE Euronext (NYSE:NYX) said that they were certain that the trades were not caused by a problem in their systems, placing the blame on an unnamed trading house.
Unstable contracts
The Goldman Sachs Group Inc. (NYSE:GS) trades targeted options contracts on multiple exchanges. All of the contracts involved in the deal had ticker symbols between H and L. The orders from the company caused a noticeable drop in the price of some contracts, with the price of certain options dropping to just $1.
NYSE Euronext (NYSE:NYX) has stated that it is looking into the trades and that most of them are likely to be voided, or busted. This morning’s trades do not appear to have been of a significant magnitude, though estimates suggest that losses could amount to millions of dollars. Those losses, or at least part of them, may have to be borne by the investment bank that caused them.
No significant problem
A Goldman Sachs Group Inc. (NYSE:GS) spokesperson said this afternoon that exchanges were working on solving the problem and that “Neither the risk nor the potential loss is material to the financial condition of the firm.” Shares in the bank have gained a fraction on the market so far today.
The trade is just the latest in a series of mistaken buys caused by the malfunction of systems used by trading houses and stock exchanges. The advent of software that can trade stock with little oversight from people is making these kinds of errors reasonably common. Technical problems have come from both stock exchanges and trading houses, and some have resulted in significant losses for those responsible.
The speed of trading offered by these systems is obviously profitable enough to justify the risks associated with them, but regulators may begin to involve themselves more in the operation of such systems if problems persist.
