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The curious case of Dyna-Mac's "error'' trades
Earlier this month, shares of Dyna-Mac were traded early in the morning at $19 when they were last done the day before at around 13 cents. The trades were quickly busted as errors and the incident forgotten. However at the time, market feedback was that the incident was very odd because after the initial trades were executed, more "sell'' orders were entered in the GL system at $19 and above. In other words, even though traders would have surely known the trades were erroneous and would therefore have been cancelled, more orders were entered at the wrong prices. Was this a case of people simply trying their luck? Were participants in the local market that naive to hope that a stock that normally sells for around 13 cents could be offloaded at $19?
Incredibly, three weeks later on Monday the incident was repeated, though this time the trades were not done early in the morning but in the final seconds. Dyna-mac's rise yesterday was 15,000% and its gain pushed the Small Cap Index up 40%, prompting a private investor to ring me - half in hope - and ask me if this was for real, The short answer I gave him was "of course not'' and that the trades would most definitely be scrubbed, which in due course was the case. Again, it appears that the incident might be quickly forgotten. Hopefully it won't be the case this time.
I find it very strange that traders would have waited until the very last seconds of the session to enter orders at wrong prices. From the timing of these trades, my feeling is that there must have been collusion between buyers and sellers and there was intent to close the stock at $20, though for what purpose is beyond me. When funds want to dress the index up, they usually wait until the final seconds but prices done during those times are usually only a bit higher or lower, not 15,000% away from latest prices. So I'd have to wonder again, could anyone reasonably have expected SGX not to intervene and wipe out such glaringly wrong trades?
Even more odd is that this morning before the market opened, "sell'' orders were entered at $19 and above, then $15. So knowing that SGX had yesterday cancelled the trades that closed the stock at $20, and knowing that the same occured three weeks ago, people still tried to execute trades at absurdly inflated prices. Even given that our market is far from efficient, I find this ridiculous and near-impossible to swallow. Once maybe is an error, twice is stretching things to the limit but a third time smacks clearly of intent. Was the goal to poke fun at SGX by demonstrating weaknesses in the GL system? Comments on market chat groups were withering, with some saying that it makes a mockery of our market that prices can be manipulated so easily. Imagine for example, if index stocks were to be closed 15,000% higher or lower. What might the consequences be for the local market even if the trades are later cancelled?
I think the exchange should get to the bottom of this by investigating where the trades originated, questioning who did them and revealing its findings to a puzzled public. If it doesn't, I have a feeling it might happen again.