Market regulators altered a series of trades late last month amid a sort of mini “flash crash” in the shares of Inter Pipeline Fund (TSX:IPL.UN), which occurred soon after the open on June 24.
On Wednesday, the Investment Industry Regulatory Organization of Canada (IIROC) reported details of the trading episode, and a subsequent regulatory decision.
IIROC reports that at 9:34 on June 24, the trading price of Inter Pipeline Fund dropped by 35% in 24 seconds, falling from $22.11 to a low of $14.21, with no material news to account for the price movement.
IIROC contacted the company and requested that it issue a press release, which it did later that morning, stating that it was unaware of any reason for the anomalous trading activity.
The regulator then also reviewed the circumstances of the trades during the relevant period with the traders involved, and determined that “the stock had traded at an unreasonable price, due in large part to the automatic triggering of a number of stop loss orders by persons with long positions in the stock.”
As a result, IIROC says its market integrity officials ruled that all trades which were executed at more than 15% below the last trade prior to the unexplained price movement (below $18.80) either be varied to a price of $18.80, or be cancelled. It says that purchasers in 106 of the 110 affected trades opted to have the trade price varied to $18.80, while the other four opted to have the trades cancelled.
IIROC says it took this action “to protect market integrity and to provide for a fair and orderly market for trading in Inter Pipeline Fund.”
The regulator notes that it is “continuing its inquiry into the circumstances that led to the anomalous trades.” Amid that investigation, IIROC says it cannot comment, given that it’s an ongoing inquiry, but that if it finds any violation of IIROC rules or securities legislation, it says it will “take appropriate action”, either enforcing its own rules or referring the case to the appropriate securities commission.