HFT in the dock as another trading error hits exchanges

HFT in the dock as another trading error hits exchanges

Stock exchanges, including Nasdaq, have been forced to cancel trades after erroneous orders in a security sent its price rocketing, according to the Financial Times.

Shares in Peet's Coffee and Tea soared nearly five per cent - from $73.89 to as high as $77.47 - on unusually high volume in the opening two minutes of trading on Nasdaq in New York yesterday morning. Nasdaq quickly sent out an alert confirming that it would cancel all trades in the company at or above $76.11 executed between 9.31 am and 9.32 am.

The error comes on the heels of the Facebook IPO fiasco and Knight Capital disaster, when a software glitch caused chaos in the markets, costing the firm $440 million and nearly sending it into bankruptcy.

This event prompted SEC chief Mary Schapiro to set up a roundtable, to be held next month, to look at how better rules and technology can be used to help combat the risks posed by high-frequency trading.

Commenting on the Peet's issue, Rik Turner, an analyst at Ovum, says: "This latest glitch can only increase the volume of calls to ban, or at least seriously restrict, the activities of the HFT community, though it is Ovum's contention that, rather than imposing constraints on HFT, the regulators would do better to encourage the adoption of faster and better monitoring technology at the trading venues."

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