This time, technological glitch not an issue in whipsawing Google shares.

[ by Howard Haykin ]

GOOG fell more than 3%, only to recover most of the drop within a second in a series of transactions that spurred concern the stock was hit by a computerized-trading error.  Minutes after the markets opened, at 9:37 a.m., Google slid as low as $775 in 2 trades totaling 210 shares and, in that same second, bounced back, according to data compiled by Bloomberg.  Shares had opened with a gain, and reached an intra-day high of  nearly $804.

No Circuit Breaker.   The decline wasn’t large enough to trigger a circuit breaker that would have paused trading in Google shares. That would have required a 10% drop within a 5-minute span. The shares are not yet part of a pilot program to test a “limit-up/limit-down” system that will stop trades from occurring at a specified

According to Mike Shea, managing partner at NY-based Direct Access Partners, said in an e-mail. “The problem with errors in high-priced stocks is that you rarely see the market center bust trades because you rarely see the stock trade up or down the 10% threshold usually required for review and relief.”

The Price Drop.   Google was trading at $796 a share, when in about 3/4's of a second if tumbled to $775.  A second later the price rebounded to $793.  The drop involved 307 trades and 57,255 shares from 10 exchanges and dark pools;  during the drop, there were 5 orders placed and then canceled for every trade executed, Nanex LLC reported.

Factoid.   The 3.1% drop erased about $6.65 billion in market value of Google’s Class A shares.  Google is the 3rd-largest company in the world, behind Exxon Mobil Corp. and Apple Inc.

Complacency.   Larry Peruzzi, senior equity trader at Cabrera Capital Markets LLC in Boston is one of many who thinks the cause was a ‘fat finger’.  He added:  “Funny how two years ago this would have been a big issue. Now the market has almost become complacent of these errors.”

For further details, go to:   [ Bloomberg, 4/22/13 ].

To contact the writer:   Howard@Compliance-Insights.com.