NYSE fined $9 million by SEC over glitch that disrupted stock market

• The glitch occurred when NYSE mistakenly ran its primary and backup trading systems simultaneously, causing the system to incorrectly process opening auctions for 2,824 of 3,421 listed securities
• NYSE took 39 minutes to recognize the error and 83 minutes to understand its full scope, reflecting inadequate written policies and procedures for managing auctions
• The exchange paid member companies more than $5.77 million for trading losses and has since enhanced its procedures and systems

NYSE Fined $9 Million Over Trading System Glitch

KEY DEVELOPMENTS:

The New York Stock Exchange agreed to pay a $9 million civil fine to the SEC to settle charges related to a January 24, 2023 technical malfunction that caused significant market disruption during the opening session.

INCIDENT DETAILS:

The glitch occurred when NYSE accidentally ran both its primary trading system (Pillar Production) and backup disaster recovery system (Pillar DR) simultaneously. This error caused the primary system to incorrectly register opening auctions as already completed for 2,824 of the exchange's 3,421 listed securities.

MARKET IMPACT:

• 84 stocks experienced trading halts
• 81 stocks saw price drops exceeding 10% without fundamental reasons
• Over 4,000 trades were busted (reversed)
• Major blue-chip companies affected included ExxonMobil, McDonald's, 3M, Verizon, Walmart, and Wells Fargo

RESPONSE TIME:

The NYSE took 39 minutes to identify the botched opening auctions and 83 minutes to fully assess the extent of the damage. The SEC cited this delay as evidence of inadequate written policies and procedures for managing the auction process.

FINANCIAL CONSEQUENCES:

Beyond the SEC fine, NYSE parent company Intercontinental Exchange paid member firms more than $5.77 million to compensate for trading losses incurred during the incident.

REMEDIATION:

The Atlanta-based Intercontinental Exchange stated it has enhanced its procedures and systems, maintaining that "NYSE opening and closing auctions continue to be the most reliable liquidity event for NYSE-listed symbols."

This settlement underscores regulatory expectations for exchanges to maintain robust operational controls and swift incident response capabilities to protect market integrity.