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'Devastating' BATS glitch that crashed Apple stock now fixed

March 26, 2012|By Tiffany Hsu
  • Bank of America Merrill Lynch traders work on the floor of the New York Stock Exchange, where there are fewer and fewer traders because of the dominance of computer trading. Will the BATS glitch on Friday change that?
Bank of America Merrill Lynch traders work on the floor of the New York Stock… (Ray Abrams )

After causing a brief crash in Apple stock, sparking investor confusion and withdrawing its own initial public offering Friday, the high frequency trading exchange BATS Global Markets seems to be glitch-free Monday.

But it must’ve been a rough weekend for executives at the Better Alternative Trading System, one of the largest stock exchanges in the U.S., where more than 10% of trading happens.

BATS, which is based in Kansas City and has offices in New York and London, had expected to be riding high after using its own platform Friday to launch its stock. Instead, a “devastating” software bug in the BATS system disrupted trading, alarming investors with its similarity to the larger “flash crash” in May 2010.

Companies with ticker symbols A through BF were impacted, the exchange said in a statement Sunday.

That included BATS’ own symbol, which sent its share price from $16 to less than a penny at one point before the company canceled trading. (New shareholders hadn’t actually traded any money or shares because BATS’s offering wasn’t set to close until Wednesday.)

Also affected: Apple’s APPL – the most valuable stock in the country, which was halted for five minutes, causing it to slump nearly 10% before recovering.

Some say they saw the catastrophe coming – critics of high-frequency trading have long worried about the industry’s ability to suddenly destabilize the market through a potent mix of speediness, massive sums and a less-than-perfect performance record. The Securities and Exchange Commission views the practice with suspicion.

With investor confidence “eroded,” BATS canceled its initial public offering. In an effusive mea culpa on the company’s website Sunday, Chief Executive Joe Ratterman said the exchange no longer had plans for an IPO in the near future.

The flub was “particularly painful” because the exchange performed as designed “99.9% of the time” before Friday and had undergone testing for months, Ratterman said.

“But in this case we failed,” he wrote. “We know we can do better. And we will.”

The exchange’s U.S. market share was at 10.6% Monday morning - which BATS spokeswoman Kelly Bailey said is normal.

"We opened our markets normally today," she wrote in an email. 

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