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Goldman, Morgan Stanley ask to cancel JMH trades after US$41b flash crash
GOLDMAN Sachs Group Inc and Morgan Stanley have asked some counterparties to cancel or amend trades in Jardine Matheson Holdings Ltd, following a US$41 billion flash crash on Thursday, during which shares changed hands at far below the market level, said people familiar with the matter.
Some of the amendment requests were to settle the trades at a higher price, said these sources, who asked not to be named as they were discussing a sensitive topic.
It wasn't clear whether the at-market sell orders from Goldman and Morgan Stanley triggered the brief plunge, or whether other factors in the pre-open auction were at play, some of the people said.
Spokesmen for Goldman and Morgan Stanley declined to comment.
Speculation has been swirling in Singapore about Jardine Matheson's dramatic start to the Thursday session, when some 167,500 shares changed hands at US$10.99, compared with the previous day's close of US$66.47, then bounced back within minutes.
That implied a loss of about US$9 million for those who sold at the pre-market level, and an instant windfall on the other side of the trade, according to Bloomberg calculations.
Three market makers had their sell orders matched at the day's low, a separate person said, also asking not to be named as the details are private. More than a dozen counterparties snapped up the cheaper shares, according to that person. The plunge briefly wiped out US$41 billion in market value.
Singapore Exchange Ltd decided not to cancel the trades. Sellers had "ample time" to withdraw their orders if they didn't want to offload shares at the low price, SGX said after reviewing the incident. The exchange attributed the decline to sell orders that overwhelmed bids during the pre-open, for which neither a fat finger nor a malfunctioning computer system were responsible.
The drama around Jardine Matheson's shares hasn't concerned Aberdeen Standard Investments, the US$736 billion money manager who has owned the stock for years.
David Smith, the Asia head of corporate governance at Aberdeen in Singapore, said: "I don't think it was a situation that we were losing sleep about. Liquidity is sufficient." BLOOMBERG