The prices of many large companies collapsed at around 11 am on the Helsinki Stock Exchange in the morning. Price movements pushed the general index of the entire stock market down almost seven percent. However, prices soon returned close to pre-collapse baselines.
The same phenomenon was repeated on other Nordic stock exchanges and, to a lesser extent, in Europe and the United States.
The cause of the so-called flash crash was not immediately known. Stockbrokers estimate this is likely to be a human error. Danske’s CFO estimates that the individual market participant’s erroneous sales orders were behind the sudden decline.
Operating the Helsinki Stock Exchange Nasdaq Helsinki managing director Henrik Husman it was a large-scale, Europe-wide event. Nasdaq also operates the Stockholm and Copenhagen stock exchanges, which saw a similar sudden decline as in Helsinki.
According to Husman, there were no problems, disruptions or faults in the stock exchange systems.
“Everything has worked as it should. It would seem that the actions of an individual party triggered this, ”Husman says.
The OMXH25 index of large companies on the Helsinki Stock Exchange fell by eight per cent at its worst.
“One party went aggressively to sell certain shares, and the other parties have gone to some extent involved in this sale. Sales spread on the Helsinki Stock Exchange, especially to companies included in the OMXH25 index. ”
Stock transactions will not be canceled
Husman says there will be no cancellation of the stock transactions made in the sudden decline.
“The threshold for canceling exchange trades is high because all parties should be able to keep trades binding. The parties have a 10-minute time window to request the cancellation of the transaction, but now the transactions have not even been requested to be canceled. ”
Winners and losers
A sudden drop may have affected the portfolio of many investors through a triggered stop loss or derivative.
Many brokers offer stop-loss orders in stock trading. The idea is to limit potential losses without the investor having to constantly monitor the price themselves. When the stop loss is on, the share will automatically go on sale after a 10% drop in price, for example.
“It’s really sad, of course, that this happened. Stop-loss is easily triggered in such a situation. As a result, investors’ positions may have been sold at a bad price. On the other hand, small investors have been able to buy shares at a good price. There are winners and losers in the situation, as in the market in general. ”
A rare event
The United States had a well-known flash crash in 2010. Husman does not recall a similar occurrence in the past in Europe.
According to the CEO of the stock exchange, the stock exchange uses automatic “volatility guards” that keep an eye on the volatility of stock exchange prices, ie fluctuations. Volavahti will launch an auction on the share when certain parameters are met. This limited stock movements today, according to Husman. In the U.S. flash crash, for example, downward movements were even sharper.
Who’s in your palm?
According to Husman, the party that triggered the sales wave is known, but Nasdaq does not want to communicate it to the outside world.
“Of course, when it comes to a Europe-wide response, it’s not a local, just a Europe-wide player.”
Although strong stock market reactions have recently been seen on the stock exchange in connection with the war, Husman considers the sudden drop in the morning to be exceptional.
“I can’t think of another case that affected so many stocks, where one party triggered a sharp decline, which recovered in a matter of minutes.”
Dagens Industri reports that the sudden decline was due to a US bank Citigroupin sales.