Aug. 25, 2010, 9:39 p.m. EDT

Circuit Breakers Prevent Sudden Losses at LSE

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By Luke Jeffs

(See Corrections & Amplifications item below.)

LONDON—Circuit breakers prevented sudden losses in five stocks Tuesday afternoon on the London Stock Exchange from causing a wider market crash, the exchange's operator said.

The prices of five LSE-listed stocks—BT Group PLC, Hays /zigman2/quotes/208836868/delayed UK:HAS +0.85% PLC, Next /zigman2/quotes/202538478/delayed JP:2120 +0.25% PLC, Northumbrian Water Group /zigman2/quotes/209265718/delayed UK:NWG -0.30% PLC and United Utilities Group /zigman2/quotes/203908003/delayed UK:UU -0.30% PLC—started to fall at 2 p.m. local time.

The cause is unknown but brokers who were watching the market at the time said Tuesday it looked like a "fat finger" trade, in which a trader pushes a wrong key or sequence of keys, or a glitch in a trading algorithm that automatically generates orders.

The impact of the sell-off was limited, however, because the LSE's automatic circuit breakers kicked in when the losses in these stocks neared 10% and trading in them was suspended. The exchange then cancelled all sell orders on the stocks and reopened trading after five minutes, at which time the shares rebounded within a few minutes to their levels before the mini-crash.

The FTSE 100 index, which had traded down 0.8% to 5138 between 12:45 and 1:15 p.m., was unaffected by the sudden fall of the five shares, hovering at the 5150 level throughout.

The London Stock Exchange Group PLC heralded the intervention as a small victory at a time when the European market model has been called into question following the May 6 "flash crash," when the Dow Jones Industrial Average fell nearly 1,000 points after a similar sell-off in a handful of stocks that wasn't stopped.

"At around 14:00, our circuit breakers were triggered in a number of securities on the Exchange's order book," a spokesman for the LSE said. "These circuit breakers are built into the exchange's systems to track the prices at which automatic executions are occurring and will halt execution if certain price-movement tolerances could be breached."

The cause of the May 6 flash crash is being investigated by U.S. regulators, but the fact that brokers could continue selling because different trading venues had different circuit-breaker rules is believed to have been a factor. Circuit breakers have been triggered on a few occasions on U.S. exchanges since the flash crash.

BT Group, Hays and Northumbrian Water Group declined to comment while Next and United Utilities were unavailable for comment.

More at eFinancialNews.com

Write to Luke Jeffs at luke.jeffs@dowjones.net

Corrections & Amplifications

Circuit breakers prevented sudden losses in five stocks Tuesday afternoon on the London Stock Exchange from causing a wider market crash. A previous version of this story erroneously said the circuit breakers were activated on Monday.

/zigman2/quotes/208836868/delayed
UK : U.K.: London
166.80 p
+1.40 +0.85%
Volume: 880,964
April 14, 2021 11:51a
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
£2.68 billion
Rev. per Employee
£568,069
loading...
/zigman2/quotes/202538478/delayed
JP : Japan: Tokyo
¥ 404.00
+1.00 +0.25%
Volume: 208,400
April 14, 2021 3:00p
P/E Ratio
51.16
Dividend Yield
0.99%
Market Cap
¥53.50 billion
Rev. per Employee
¥27.92M
loading...
/zigman2/quotes/209265718/delayed
UK : U.K.: London
£ 197.60
-0.60 -0.30%
Volume: 1.84M
April 14, 2021 11:51a
P/E Ratio
N/A
Dividend Yield
0.02%
Market Cap
£22.98 billion
Rev. per Employee
£237,730
loading...
/zigman2/quotes/203908003/delayed
UK : U.K.: London
944.00 p
-2.80 -0.30%
Volume: 206,411
April 14, 2021 11:54a
P/E Ratio
58.60
Dividend Yield
4.53%
Market Cap
£6.61 billion
Rev. per Employee
£337,748
loading...

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