(MarketWatch) - Many investors likely tried to buy what appeared to be a more than 99% dip in Berkshire Hathaway Inc. Class A shares during Monday’s New York Stock Exchange trading glitch.
Some got more than they bargained for — at least temporarily — and likely learned an important lesson.
According to a series of posts on the WallStreetBets subreddit, several users of the site complained that their orders, which they claimed to have filed when the stock was halted at around $185 a share, were ultimately filled once trading had resumed — leaving them with a single share of Berkshire’s Class A stock, a massive margin debt and a mark-to-market loss.
At least three users shared a similar situation on Reddit, and MarketWatch reached out to each of them. Only one responded and declined to comment or provide any more details, beyond saying that his account had been rectified by Tuesday morning.
Another said in his post that the trade was currently under review with his broker. A third posted an update saying the trade had been canceled.
Berkshire’s Class A BRK.A shares are currently trading at around $614,000, down 2% since Wall Street opened on Monday, according to FactSet data. The conglomerate’s Class B shares BRK.B trade at a far more modest level, closer to $400 as of late Wednesday.
Speculation on WallStreetBets was that the traders saw their orders filled because they used market orders, rather than limit orders. One screenshot showed the filled order was marked “market buy,” stoking commenters’ suspicions.
Typically, most electronic-brokerage platforms default to limit orders — which means that if the price of the share or exchange-traded fund a trader is trying to buy moves above a certain limit, the trade isn’t filled. It isn’t clear whether the traders affected opted for market orders instead. But most brokers also allow traders to place orders of different types, including market orders that can be filled regardless of the price that shares are trading at.
Most brokers have margin limits and will automatically reject orders if they’re too large relative to the amount of money the investor has in their account. How or why these orders were ultimately filled remains unclear.
The New York Stock Exchange said in a statement published Monday evening that it was busting — that is, invalidating — all trades in Berkshire’s Class A shares executed between 9:50 a.m. and 9:51 a.m. Eastern time that were priced at or below $603,718.30.
Shares in dozens of other companies were also affected by the glitch. The NYSE has said it would also automatically bust all suspect trades executed below a certain price in shares of the Bank of Montreal BMO, Chipotle Mexican Grill Inc. CMG, Barrick Gold Corp. GOLD and others. No appeals will be allowed.
For their part, the electronic brokerages also appear to be largely forgiving of customers who may be having this problem.
At least one of the Reddit RDDT users shared a message from Interactive Brokers Group Inc. IBKR saying that the trade had been canceled. A spokesperson for the company declined to comment when approached by MarketWatch.
Meanwhile, a spokesperson for Charles Schwab Corp. SCHW, which owns a popular brokerage platform, said the firm would be working with customers to reverse any orders that were filled due to “infrastructure failures” associated with the glitch. Schwab recently purchased and incorporated TD Ameritrade, a rival electronic-brokerage platform.
“Any retail trader or investor — at Schwab or elsewhere — who traded in these stocks was unfortunately at risk of being affected by the inaccurate price displays,” the Schwab spokesperson said in a statement.
“Schwab is actively participating in industry discussions and advocating on our clients’ behalf to address these types of infrastructure failures. We at Schwab took the course of working with impacted clients to resolve these losses,” the spokesperson said.
Representatives from other electronic-brokerage firms including Robinhood and Morgan Stanley-owned E-Trade didn’t respond to a request for comment.
By Joseph Adinolfi
