"NYSE to Pay Full Refunds to Over Half of Investors Affected by Glitch"

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NYSE to Pay 60% of Post-Glitch Trading Applications in Full

(Bloomberg) – Investors burned by last month’s New York Stock Exchange malfunction can recoup all of their losses, but only if their trades meet certain parameters. The rest can end with nothing.

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The exchange operator told customers in recent days that between 50% and 60% of the claims they have filed for investors are eligible for a full refund, according to people familiar with the matter. The NYSE plans to cover losses on orders accepted on its exchange but not orders triggered on other trading venues, the people said, asking not to be identified if they were discussing a private matter.

The reimbursement, which is in the single-digit millions, is well in excess of the $500,000 the NYSE allocates each month to cover disruptions, with $50,000 carried over from previous months. The NYSE may need to seek regulatory approval to cover losses that exceed that pool, the people said.

“In accordance with our rules, we expect to refund members 100% for all affected orders received by the exchange,” a NYSE spokesman said in an emailed statement Monday. “This is part of the protection that comes with trading on a transparent, public exchange.”

The glitch, which the NYSE blamed on human error, canceled thousands of trades affecting hundreds of securities, including ones that fell outside of parameters set to avoid large price swings, or so-called limit-up, limit-down bands became. Other trades were affected, but fell outside of parameters for one trade that was marked null and void.

Thousands of claims have been filed by retail brokers including Charles Schwab Corp. and Robinhood Markets Inc., as well as market makers Virtu Financial Inc. and Citadel Securities, the people said.

The rules for filing claims gave NYSE until late last month to evaluate it and decide how much it would pay. For the roughly 40% that don’t qualify, investors will be hooked, including for trades initiated on other exchanges due to errant pricing on the NYSE.

Talks are still ongoing and clients of the exchange, including market makers and retail brokerage firms, could appeal the NYSE’s decision and roll back the calculation if they choose to pursue the matter further, the people said.