Stop loss made losses
Traders are concerned about a series of trades on Tuesday which caused hefty falls in the share price of David Jones and Macquarie Airport stocks, only for the price to recover within minutes.
MacAir was trading at $3.38 at 10am and within 15 seconds a series of trades pushed it down to $2.99. Within three minutes it was back up to $3.39.
In the case of DJs, shares were trading at $2.09 shortly after 10am when they fell to $1.91 within 30 seconds before jumping back up to $2.07 within two minutes.
Marcus Padley from Tolhurst Noall said cascading stop-loss orders - pre-programmed levels at which investors can automatically trigger a sale - caused the volatility. The orders were made via online retail broker CommSec.
Padley said futures traders expected automatic stop-loss orders given they traded overnight, with a fall triggering sales but a recovery in the price by the time they arrived at work.
"In the equities market we are not used to this. If these two incidents were as a result of the conditional order system at CommSec then the market needs to know that and wise up to the fact that what happened is going to become a regular unhealthy feature of daily trading."
CommSec general manager Michael Blomfield said: "I don't believe for a moment we have a problem," adding "nor have we breached any obligation to maintain a reasonable market.
"Conditional orders are a way of capturing latent demand ... they tell us in effect what clients would do if certain circumstances occur. What's changed in this world is technology allows it to happen faster.
"I don't believe my clients have been stung and would be prepared to bet we get no complaints from our clients because they wrote these requests down."