Sometimes, even a computer can go wrong. At least, the latest announcement made by Bats Global Markets seems to be supporting that. The 3rd largest stock exchange operator in US, Bats Global Markets announced that certain computers allowed traders to get into trades despite violating the rules. Therefore, the customers have not always been able to get the best prices and statistically, the total losses for the customers have been $420360. The Bats’ computers are programmed in a way that any trade executed through these systems always have to comply with certain rules.
So, which computers did exactly go wrong? Well, the ones which match the orders for two Bats equity exchanges and also the options venue. This violation helped certain traders to operate trade for a bid that’s lower than the best prices available. This malfunction has been going on for over 4 years now, as confirmed by Bats Global Markets.
The trading procedure in US is fragmented across 13 different exchanges and numerous other venues as well. This is done to ensure that fairness is preserved throughout.
According to the Finance and Business Economics Professor of Southern California University, Larry Harris, this trading mishandling in Bats Global Markets’ computers is another example of problems that happen with the electronic exchange systems. He added that as a result, Bats are sure to go under the scrutiny of SEC pretty soon and at this time of the year; they would have certainly liked to avoid any incident of this type. He however praised the Bats officials for coming out public on this problem after identifying the same, so that regulators could start the checking procedure.
According to Joseph Ratterman, the Chief Executive Officer of Bats, the market regulations are more complex than they require being. Joseph added that the problem experienced by Bats’ computer probably hints the same as well. He commented that around 0.0009% of the options trades were affected, whereas, 0.004% of the trades done through the equity exchanges were showing wrong data.
Joseph added that they will discuss it with the representatives of the SEC, when it comes to the compensation policy for the customers. Incidentally, the company was scheduled to have its first IPO offering on 23rd March, 2012; however, the same was cancelled due to some other technical glitches.