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发帖数: 16971 | 1 By AL YOON, JACOB BUNGE AND NICK TIMIRAOSAl Yoon
Updated Nov. 7, 2013 3:40 p.m. ET
Trading in thousands of unlisted shares, including the government-backed
mortgage companies Fannie Mae FNMA +4.78% and Freddie Mac, FMCC +2.71% was
frozen for more than five hours Thursday after a "connectivity issue"
knocked out stock quotes at online-quotations company OTC Markets Group Inc.
OTCM -0.64%
The outage prevented the New York company from opening trading Thursday
until 3 p.m. EST.
OTC Markets provides quotes for equity securities that aren't listed on
major U.S. exchanges such as the New York Stock Exchange NYX +0.15% or the
Nasdaq Stock Market NDAQ -1.07% —a category that includes scores of little
-known, thinly traded companies but also comprises Fannie, Freddie and some
U.S. securities issued by global giants such as Nestle SA NESN.VX +0.53%
and Adidas AG ADS.XE +3.99% .
OTC Markets' outage was "purely a connectivity issue," said a spokeswoman
for the company.
Thursday's OTC trading shutdown is the latest glitch to hit U.S. financial
markets following a series of malfunctions at the biggest U.S. stock
exchanges in recent years, which in some cases have led to losses for
financial firms and brought scrutiny from regulators.
The developments have raised concerns among many market players about the
stability of the technology backing trading in stocks, bonds and commodities
, and the potential for a broader meltdown that could saddle investors with
losses, though observers said the response to Thursday's developments was
muted.
"Had it been Nasdaq or BATS, people would be going nuts right now," said
Joseph Saluzzi, a partner at Themis Trading LLC, referring to major exchange
operator BATS Global Markets Inc. "I haven't seen much of that."
The latest trading hiccups come amid intense scrutiny of the technology
underpinning the U.S. markets. Technology-driven failures such as the May
2010 stock-market "flash crash," in which the Dow Jones Industrial Average
dropped more than 700 points in a matter of minutes before recovering, and a
botched initial public offering of Facebook Inc. have drawn criticism. A
technology glitch last year nearly sank Knight Capital Group Inc.
In August, the Nasdaq Stock Market froze for three hours because of a
connection problem, and stock-options markets were roiled early one session
because of a faulty system at Goldman Sachs Group Inc. GS -2.37% In
September, all U.S. stock-options trading was briefly halted because of an
outage at a price-reporting system. Just last week, the Nasdaq Composite
Index froze for nearly an hour because of data-transmission problems.
On Thursday, OTC Markets staff noticed technology problems around 6 a.m. and
opted not to open up trading when the U.S. stock market opened at 9:30 a.m.
, the OTC Markets spokeswoman said.
Late Thursday morning, the Financial Industry Regulatory Authority halted
trading in all OTC equity securities because of the "lack of current
quotation information." Finra sounded the all-clear Thursday afternoon. A
spokeswoman for Finra, the Wall Street-funded regulator for the securities
industry, directed questions to the OTC Markets.
Though OTC Markets' systems were down, brokers were still able to trade
unlisted securities directly with one another and match up trades internally.
The glitch left traders in Fannie and Freddie, which were the most
frequently traded over-the-counter stocks last month by dollar volume,
unable to access the main venue for trading unlisted securities.
For much of Thursday, Fannie Mae was listed as up 10 cents at $2.40 on
volume of 391,880 shares, according to the OTC Markets website.
After trading reopened Thursday afternoon, the stock continued to trade in
that range as volume rose. At 3:16 p.m., the stock was quoted at $2.37 on
volume of 6.4 million shares.
Average daily volume over the past three months was 19.4 million shares,
according to the OTC Markets website.
OTC Markets, previously known as the "Pink Sheets," lets investors trade
about 10,000 securities, including companies whose practices and disclosures
don't meet the requirements for listing on a major exchange.
"If you own one of those in your portfolio and want to sell it, you're out
of luck right now," said Mr. Saluzzi amid the outage.
OTC Markets' roster also includes Fannie and Freddie, which in 2010 were
ordered by their regulator, the Federal Housing Finance Agency, to delist
their shares from the New York Stock Exchange. At the time, the companies'
shares were trading below $1, and the FHFA concluded that it wasn't worth
taking the steps necessary to avoid delisting.
Fannie Mae and Freddie Mac since have become enormously profitable, buoyed
by a federal backstop, an improving housing market and little competition
from private investors.
Fannie reported a third-quarter profit of $8.7 billion shortly before 7:30 a
.m. on Thursday, and Freddie Mac reported a $30.5 billion profit nearly an
hour later.
The companies also said they would pay $39 billion in dividends to the U.S.
Treasury. Freddie's dividend payment of $30.4 billion means the company will
have paid more in dividends than the $71.3 billion in taxpayer cash it took
between 2008 and 2011.
While those payments can't pay off the $188 billion in shares the government
has taken in the firms, the profits have nevertheless sparked heavy trading
in the common and preferred shares of Fannie and Freddie beginning in March
of this year. Several hedge funds and institutional investors, including
Fairholme Funds, have built sizable positions in the preferred shares of
both companies.
Fannie and Freddie common and preferred shares are among the most-traded
shares on OTC Markets, according to data from the company and Finra.
But those are effectively political and legal bets, not financial ones,
because Fannie and Freddie's bailout agreement doesn't allow them to pay
back the government, meaning they can't emerge from government control
without action from Congress or the Treasury.
—Alexandra Scaggs contributed to this article. |
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