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NASDAQ fines Morgan Stanley over coding error in trading software

A large number of orders were submitted accidentally, causing volatility

Morgan Stanley International has been fined £35,000 by NASDAQ OMX Stockholm after a coding error in its algorithm software caused unusual volatility in the market on 30th November last year.

The glitch resulted in Morgan Stanley accidentally submitting a large number of orders and executed a very large number of trades in a group of Stockholm listed shares, which caused the volatility.

NASDAQ immediately spotted the unusual trading pattern, but was unable to contact the Morgan Stanley trader responsible for submitting the orders, which resulted in a breach of the Exchange's Nordic Member Rules.

The rules state that members conducting direct market access trading should ensure that they can be contacted at any time during trading hours.

NASDAQ also noted that although Morgan Stanley's internal systems and controls enabled them to detect and independently terminate the trading, it felt that the incident itself highlighted that the firm did not have technical and administrative arrangements implemented to stop it from happening in the first place.

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