Many investors likely tried to avoid a more than 99% dip in Berkshire Hathaway Inc.’s Class A shares during Monday’s trading disruption on the New York Stock Exchange. to buy.
Some got more than they bargained for – at least temporarily – and probably learned an important lesson.
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According to a series of posts on the WallStreetBets subreddit, several users of the site complained that their orders, which they claimed to have submitted when the stock was halted at around $185 per share, were ultimately executed once trading resumed – leaving them with a single share of Berkshire’s Class A stock, massive margin debt and a market value loss.
Also read: Were you trying to buy the dip after the Berkshire Hathaway glitch? Here’s the bad news.
At least three users shared a similar situation on Reddit, and MarketWatch contacted them. Only one responded, declining to comment or provide more details other than to say his account was corrected Tuesday morning.
Another said in his post that the transaction is currently under review by his broker. A third posted an update saying the transaction had been canceled.
Berkshire’s Class A BRK.A shares are currently trading at about $614,000, down 2% since Wall Street opened Monday, according to data from FactSet. The conglomerate’s Class B shares BRK.B are trading at a much more modest level, closer to $400 as of late Wednesday.
Speculation on WallStreetBets was that traders were seeing their orders filled because they were using market orders instead of limit orders. One screenshot showed the filled order marked as “market purchase,” raising the suspicion of commentators.
Normally, most electronic brokerage platforms limit orders by default – meaning that if the price of the stock or exchange-traded fund a trader tries to buy above a certain limit, the trade will not be executed. It is not clear whether the traders involved opted for market orders instead. But most brokers also allow traders to place different types of orders, including market orders that can be executed regardless of the price at which shares are trading.
Most brokers have margin limits and will automatically reject orders if they are too large in relation to the amount of money the investor has in their account. How and why these orders were ultimately fulfilled remains unclear.
The New York Stock Exchange said in a statement released Monday evening that it was canceling 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 or lower (i.e. saying invalidated).
Shares of dozens of other companies were also hit by the outage. The NYSE said it will also automatically detect any suspicious trades executed below a certain price in shares of Bank of Montreal BMO, Chipotle Mexican Grill Inc. CMG, Barrick Gold Corp. GOLD and others would stop. There will be no appeal.
For their part, electronic brokers also appear to be largely forgiving of customers who may be experiencing this problem.
At least one of the Reddit RDDT users shared a post from Interactive Brokers Group Inc. IBKR stating that the transaction had been canceled. A company spokesperson declined to comment when contacted by MarketWatch.
Meanwhile, a spokesperson for Charles Schwab Corp. said. SCHW, which owns a popular brokerage platform, said the company would work with customers to reverse any orders that had been fulfilled due to “infrastructure failures” related to the outage. Schwab recently purchased and founded TD Ameritrade, a rival electronic brokerage platform.
“Any retailer or investor – at Schwab or elsewhere – who traded these stocks was unfortunately at risk of being affected by the inaccurate pricing,” the Schwab spokesperson said in a statement.
“Schwab actively participates in industry discussions and advocates on behalf of our customers to address these types of infrastructure failures. We at Schwab have completed the course to work with affected customers to resolve these losses,” the spokesperson said.
Representatives from other electronic brokerage firms, including Robinhood-owned E-Trade and Morgan Stanley, did not respond to a request for comment.
