[ by Howard Haykin ]

Stock exchange operator Nasdaq OMX canceled a series of pre-market trades that resulted in wild price swings in a number of stocks on Thursday, including Citigroup and Hewlett-Packard.  Nasdaq said in a statement it is was cancelling the trades in 9 stocks in which trades occurred at prices that marked a swing of 10% or more from Wednesday's closing prices.  The exchange provided "no comment further than our ruling."

Trades executed in the last minute of pre-market trading on a 3rd-party platform show wild swings in shares. HP, for instance, closed Wednesday at $14.53 a share.  On Thursday, prior to the market opening, Nasdaq saw more than 50 trades at $3.06 a piece, according to Thomson Reuters data. 

According to Dennis Dick, market structure consultant and prop trader at Bright Trading in Detroit, said these types of flash crashes happen so frequently now that they've almost become the norm.  "Basically an order was directed at Nasdaq, and it swept out the liquidity on that exchange. So, despite liquidity being there on other exchanges, that order didn't interact with that liquidity."  However, Mr. Dick added that busting trades creates a number of issues for investors, and damages investor confidence in market structure.

Other stocks affected by the cancelations include:  AT&T, Wells Fargo, Western Union, Goldman Sachs, and Sprint Nextel.  Nasdaq said trades in the following stocks will stand: Hess Reynolds American, Williams, Salesforce, IBM, Leucadia National, and Molson Coors. Those stocks had also been listed in an announcement by Nasdaq of its investigation into potentially erroneous transactions just before the opening.

For further details, go to:   [Reuters, 12/13/12].