Bargain hunting in Berkshire stock
Repeat after me; “HFT provides liquidity”. If you were fast enough, you could have bought Berkshire stock at lower average price than the Oracle himself. Unfortunately, it was really hard to spot while taking place. From Nanex.
At 9:32:21, the stock price of Berkshire Hathaway crashed to just 10% of its value in the blink of an eye. Literally. In about 180 milliseconds, 29 trades took BRK.A from 121,862 to 12,011.10, a loss of 90%. Nasdaq’s bid dropped all the way to 1.00 — which is an improvement from 2 years ago when many stocks went to a penny after the flash crash.
Maybe someone needed to get out right away. Maybe the owners of Berkshire aren’t market savvy. Maybe Warren Buffett was splitting the stock. Maybe these High Frequency Traders (HFT) know a lot more about pricing stocks than the rest of us. Maybe this was their new volatility inducing algo (that we stumbled on yesterday) gone awry.
1 millisecond chart showing trades (circles), bids and asks (triangles) color coded by exchange.
At 10:37:48, the NYSE sent out this notice:
The Sell Short Restriction in BERKSHIRE HATHAWAY (NYSE: BRK A) was triggered by trades at or below $118,340.96 that were executed at 9:32:21 a.m. ET. The exchange trades have been busted pursuant to exchange clearly erroneous rules. (No trade at or below that price occurred on the NYSE.) According to the ruling market(s), this decision is not subject to appeal.
Accordingly, the Sell Short Restriction that was triggered by these trades will be lifted at 10:47 a.m. ET today. Once the Sell Short Restriction is lifted, Sell Short orders on the NYSE will be refiled at their limit prices.