Neither fat finger nor manipulation responsible for US$41 billion flash crash, says Singapore Exchange

What was shaping up to be a ho-hum market open in Singapore suddenly became the most dramatic session in years, with a haphazard spree of sell orders causing a US$41 billion crash in the city’s biggest stock on Thursday.

Jardine Matheson Holdings, the flagship investment firm of a 186-year-old conglomerate that hadn’t posted a double-digit stock decline since April 2009, plunged 83 per cent in pre-market trading. While the drop reversed almost as quickly as it happened, some 167,500 shares changed hands at prices less than a quarter of the previous day’s close.

Speculation raged across trading desks as to whether an inept human or badly-programmed machine was to blame. Sell orders overwhelmed bids during the pre-open, for which neither a fat finger nor a malfunctioning computer system were responsible, Singapore Exchange said in an emailed statement after the market closed.

There was no evidence of manipulation and trading was orderly, the bourse said.

Still, if the orders themselves weren’t a mistake, the price reaction almost undoubtedly was. It’s a reminder of how quickly losses can happen in lightning-fast financial markets, exacerbated in this case by the fact that Singapore’s circuit breakers only kick into action when the regular trading session begins. Those who sold at the pre-market price left about US$9 million on the table, according to Bloomberg calculations.

“The extent of the price plunge was certainly out of the norm, one that had folks questioning if it had really occurred,” said Jingyi Pan, a market strategist at IG Asia in Singapore. “The rapid movements unfolding in the early hours of the market open could have enabled this to slip away.”