Symantec Shares Plunge as Traders See Mini 'Flash Crash'

Tuesday, 30 Apr 2013 12:54 PM

 

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Shares of Symantec Corp. plunged some 10 percent in a matter of seconds on Tuesday before being halted by the Nasdaq, in the latest instance of what traders called a single-stock "flash crash."

There was no news on the security software maker that triggered the move around 10:11 a.m. EDT (1411 GMT). Symantec spokesman Cris Paden said he could not immediately comment on the unusual movement in the stock price and a spokesman for Nasdaq said the exchange had no immediate comment on the trading.

Approximately 504,000 Symantec shares were traded in a three-second period that saw the stock dive from $24.40 to a low of $21.93 before it was halted. Trades were executed on numerous exchanges, but the heaviest volume was seen on the Nasdaq Stock Exchange, according to Thomson Reuters data.

"Usually these things start with some kind of investor sending a sell order with the wrong limit price, for example, then high-frequency trading algorithms quickly recognize the error and they short in an aggressive fashion until a circuit breaker is triggered," said Sal Arnuk, co-manager of trading at Themis Trading in Chatham, New Jersey.

Equity traders called the sharp move a single-stock "flash crash," in reference to the May 2010 selloff that saw the Dow fall more than 600 points in a matter of minutes. The dominance of high-frequency trading (HFT) has been a point of contention for many traders who believe it exaggerates violent moves in equities.

Before HFT prevalence, "a series of market makers would have filled this mistake with substantially less carnage," said Arnuk. "Today's market structure is perfectly set up to take advantage of any and all missteps in the most efficient manner ... if you were day-trading this, or had a stop-loss order in, then you got hit not because of your thesis, but because of a market structure issue."

Shares of Symantec resumed trading five minutes after being halted, and bounced back above $24. They fell 1.2 percent to $24.29 in midday trading.

These moves rattle investors with their violent natures and lack of warning. When this happens, some market makers that provide liquidity will withdraw their bids, while investors are hit with stop-loss orders, which are directions to automatically sell a stock if it breaches a particular threshold.

"Liquidity is an illusion... it's never truly there when it's needed. It vaporizes in an instant, then quickly reappears to trap the suckers who just sold into the void," said Sean McLaughlin, director of investor relations solutions at StockTwits in Boulder, Colorado.

McLaughlin added that he only traded options now "so as to be insulated from these egregious breaches of market structure."

© 2014 Thomson/Reuters. All rights reserved.

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