Australia Probes Surge at Opening of Trading
October 18, 2012
Trades in about a dozen Australian equities including Australia & New Zealand Banking Group Ltd. and AMP Ltd. surged at the open in the absence of company news, prompting inquiries by the market regulator.
ANZ, which closed yesterday at A$25.96, opened 6.4 percent higher when 836,205 shares changed hands in 349 trades, all at the ask price of A$27.63, according to data compiled by Bloomberg. The stock fell back to A$26.13 within a minute and closed at A$25.96. Insurer AMP jumped 4.5 percent at the open while Brambles Ltd. surged 7.6 percent.
The incident comes 2 1/2 months after Knight Capital Group Inc., one of the biggest market makers in U.S. stocks, bombarded American exchanges with mistaken orders in the first minutes of trading on Aug. 1. The company blamed the mishap on defective software. Two weeks ago, orders for Indian stocks improperly entered by a Mumbai brokerage sent the S&P CNF Nifty Index down 16 percent over eight seconds before it rebounded.
“It’s unlikely that someone was consciously manipulating prices but it could easily be that something’s gone wrong,” said Angus Gluskie, managing director at White Funds Management in Sydney who manages more than $350 million. “There’s a greater chance of something like that happening today because it was an options expiry day. It was very unusual and we’d also like to know why it happened.”
The Australian Securities and Investment Commission has commenced informal inquiries into the incident, Andre Khoury, a Sydney-based spokesman for ASIC said in a statement. There haven’t been any requests to cancel trades, Matthew Gibbs, Sydney-based spokesman for ASX Ltd., operator of the country’s main bourse, said by telephone.
“Today was the expiry day for the October ASX 200 Index futures contracts, which often generates heightened trading activity as investors seek to unwind their positions,” Gibbs, said by e-mail.“ASX alerted ASIC this morning and has been closely monitoring trading throughout the day, which has been orderly.”
The stocks that moved unusually today were mainly those attached to companies whose tickers begin with the letters A and B. Australia’s market opens in phases according to the alphabetical order of tickers, ASX said.
“The settlement price of the futures contract is effectively at the opening price and it’s not unusual for traders seeking to unwind arbitrage positions to do that at the open,” Alex Frino, chief executive officer of the Capital Markets Co-operative Research Centre in Sydney said in a telephone interview of the futures expiry date. “When arbitragers construct portfolios, they typically don’t use all of the stocks in the ASX200, they use a proxy portfolio.”
AGL Energy Ltd., which closed yesterday at A$14.84, opened 4.3 percent higher when 177,416 shares changed hands in 107 trades at the price of A$15.84. It has traded at an average price of $14.95 since five minutes after the open.
AMP Ltd. opened 4.5 percent higher when 1.1 million shares were exchanged in 157 trades at A$4.85. The stock has since traded at an average price of A$4.70, data compiled by Bloomberg show.