The New York Stock Exchange (NYSE) has agreed to pay a $9 million civil penalty to settle charges brought by the U.S. Securities and Exchange Commission (SEC). The charges relate to a computer malfunction in January 2023 that significantly disrupted the opening of the stock market, leading to substantial price fluctuations in prominent blue-chip stocks. Intercontinental Exchange (ICE) owns the New York Stock Exchange, operating global exchanges, clearing houses and listing venues. ICE delivers data services and technology solutions for financial institutions.
The settlement, finalised on Friday, stems from an incident on January 24, 2023, when the NYSE mistakenly ran its primary and backup trading systems, known as Pillar Production and Pillar DR (Disaster Recovery), concurrently. According to the SEC, this error caused the primary system to incorrectly process opening auctions for 2,824 of the 3,421 securities listed on the NYSE at the time, as if they had already occurred.
As a result of the glitch, trading was temporarily halted for 84 stocks. Of those, 81 experienced price declines exceeding 10% without any apparent justification. Furthermore, over 4,000 trades were cancelled or ‘busted’ due to the erroneous activity. Among the stocks impacted were major corporations such as ExxonMobil, McDonald’s, 3M, Verizon, Walmart, and Wells Fargo.
The SEC stated that it took the NYSE 39 minutes to detect the error in the opening auctions and a further 83 minutes to fully grasp the extent of the damage. This delay allegedly reflected the exchange’s inadequate written policies and procedures for managing the auctions. The NYSE has already compensated member companies with over $5.77 million for losses incurred due to the trading disruptions. Intercontinental Exchange said it has since enhanced its procedures and systems to prevent future incidents.
