Direct Edges Discloses Order-Handling Discrepancies
January 16, 2013
Direct Edge said this discrepancy may have occurred on either EDGA or EDGX and had been affecting the system since the time both exchanges were launched in July 2010.
Direct Edge said in the December notice that its second discrepancy should be fixed by Feb. 4, however, in its follow-up notice, the company pushed that date back to Feb. 15. Direct Edge said in the later notice that “[t]he additional time will be used for further testing of the system change prior to implementation.”
The issue with BATS and Direct Edge comes at a time when traders, regulators and market observers are growing more concerned about the complexity of “unique order type combinations” that provide buy or sell instructions, as well as the efficiency of the order prioritizing systems and pricing mechanisms used by the myriad exchanges that buy and sell securities on a daily basis. Indeed, these system discrepancy disclosures have occurred following a period that has seen breakdowns on U.S. exchanges, rapid-fire trading mishaps, and the infamous Flash Crash, all which have raised red flags on the integrity of the nation’s electronic trading infrastructure.
“These announcements don’t leave me with a lot of confidence that this will be the last of them,” Nanex’s Hunsader said.
Daily volume on Direct Edge’s two exchanges in 2012 averaged 724.1 million shares, according to the Securities Industry and Financial Markets Association.
Daily volume at BATS’ two exchanges was 759.0 million. Volume at Nasdaq’s three exchanges totaled 1.7 billion shares a day; and NYSE’s three exchanges came in at 1.4 billion, by SIFMA’s tally.