The action is a quick admission that something went terribly wrong as the market was in free fall. But, the action, while swift, may be premature. The SEC and CFTC are examining what happened. Some experts believe that an incorrect order placed by a major firm was at fault. Others say that high-volume trading programs which stopped bidding for shares caused the incident. P&G shares moved from down 2% to off 21% in a matter of moments. Floor traders had to make adjustments to bring the stock to a reasonable level.

“NASDAQ OMX reported that we had no technology or system issues associated with the trading that occurred between 2:00 p.m. and 3:00 p.m., ET,on May 6,” according to the exchange.  That allows it to place the blame elsewhere. Using an arcane rule, NASDAQ said it will simply reverse a number of trades. “We have coordinated a process among U.S. Exchanges and therefore, pursuant to NASDAQ Rule 11890(b), NASDAQ, on its own motion, will cancel all trades executed between 14:40:00 and 15:00:00 greater than or less than 60% away from the consolidated last print in that security at 14:40:00 or immediately prior.”

Some traders who actually may have made money as stocks bottomed based on data that they thought was legitimate, will lose billions of dollars in gains. And, investors who lost billions will have those loses wiped out.Among the 296 companies which will have trades reversed were stocks that trade on both the NYSE and NASDAQ such as Accenture and a number of mutual funds, and ETFs.

The NASDAQ said that “this decision cannot be appealed.”  But the fight over the losses and gains of traders during that 20 minute period is not over. There is too much money at stake.

Douglas A. McIntyre

Some traders speculate that the market has run too far, too fast.

If employment starts to pick up, housing improves, and corporate earnings continue to rocket in the second quarter, the precedents set by 2007 tops could disappear as the market breaks through them.  Douglas A. McIntyre

Chart from The Chart Store.

Before thinking this will add significantly to NASDAQ any time soon, you might want to look at the English version of the active stock page trading volume there.

Jon C. Ogg
September 23, 2008

The NASDAQ yesterday reached a mutual deal with Borse Dubai that will allow it to gain control of the OMX.  In exchange, NASDAQ is giving up most of its holding (appears to be a 28% stake of 31.5%) in the London Stock Exchange.  But NASDAQ is also kicking in a 20% stake of its own stock.  The NASDAQ purchase price would be equivalent to about $41.00 per per share, and it appears this is for only a 5% voting stake with an ‘independent trustee’ holding the rest. NASDAQ will also get a stake in Borse Dubai, but we are going to stop there. because this is starting to sound like a monopoly game where the second and third tier players gang up on the likely winner. 

There are just two problems: the Qatar Investment Authority has steppedin to potentially give a higher bid for the OMX with a 9.98% stake androughly a 20% of the LSE.  The bigger problem is that Senate BankingCommittee Chairman Christopher Dodd (D-Conn.)  is out saying thisrequires close review, and Senator Schumer is saying it raises seriousquestions about allowing foreign governments to acquire U.S. financialexchanges.  Hopefully this is just political jawboning and saberrattling.

Many in the markets have the feeling that uncheckedand fettered capitalism is the best path to prosperity.  That may betrue and it might not, but some sense has to be put into the equationon both sides.  If workers are competing against child and slave labor,that isn’t fair; but conversely if governments will not even allowstakes to be held in companies then the pendulum is going to far thatway too.

This is not the Dubai Ports deal, which was a highlypoliticized event.  This is a small stake with limited voting rightsand influence, and to top it off in case the insulated boys in D.C.didn’t realize it then they should look closely: NASDAQ NEEDS HELP, BIGTIME.  The boys in D. C. didn’t exactly go out and claim how the NYSEacquisition of Euronext to become NYSE Euronext (NYSE:NYX) might beunfair to the Europeans, and that was for all practical purposes acomplete power shift and total buyout. 

The single largestshareholder in the mega-giant bank Citigroup (NYSE:C) is Al-Waleed binTalal, and that wasn’t a horrific scare when they needed it.  Trying tocalculate how many US-workers (not including the private securityworkers) and the tens (or hundreds?) of billions of dollars that we getannually in Middle-Eastern infrastructure construction and maintenancecontracts is beyond our own databases.  It’s also beyond that of the U.S. Labor Department because if you see the calculations they make you know they are using a single abacus that always double-counts in favor of the house.

Some protectionism andsome regulation is actually OK for everyone, because if everyone is uncheckedand has no rules then there will be a bad end.  But total protectionism(particularly over certain stakes) is almost equally as bad and will ultimately becounter-productive.  If the D.C. regulators would accept the state ofthe world for what it is and go ask NASDAQ if this is what it needs,they will hear a resounding "YESSSSS!" back on the phone.

NASDAQclosed up only 1.35% today at $36.51, well short of the $41.00+ termswith Dubai for a small stake and well under the $38.00+ opening pricesbefore the saber rattling started.

Jon C. Ogg
September 20, 2007