May 20, 2013

Loophole Exploited in Anadarko Petroleum Flash Crash

The loophole exploited by HFT’s in Anadarko Petroleum flash crash.
On May 17, briefly, APC stock crashed to $0.01 per share.

Themis Trading on the loophole exploited by HFT’s which took the price down to $0.01 per share. 
Two things should have protected your stock from crashing: circuit breakers and the elimination of stub quotes.  However, the new Limit up/Limit Down (LULD) circuit breaker system did not activate. LULD does not apply after 15:30 pm during Phase 1 of its rollout.  Also, stub quotes, which were supposedly banned by the SEC, were still in place and allowed your stock to trade at $0.01/share. The $0.01/share trades occurred on NYSE, which used to have an LRP system that would have prevented this from occurring.  But once LULD went into effect, NYSE removed their LRP system.  Essentially, recently enacted stock exchange regulations left your stock unprotected.

Tags: anadarko petroleum stock flash crash, APC stock flash crash, hft trading APC stock