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A trading error is being blamed for a sickening but short-lived plunge in the price of Inter Pipeline Fund, during which the units dropped 36 per cent.
All trades that took place below $18.80 have been adjusted to that amount or cancelled, the Investment Industry Regulatory Organization of Canada (IIROC) said.
Inter Pipeline units, which closed Friday at $22.90, plummeted to $14.21 on the Toronto Stock Exchange minutes after trading began on Monday, causing regulators to immediately halt the stock.
Inter Pipeline, already scrambling to continue operations after being flooded out of its downtown Calgary office, put out a statement about 90 minutes later saying there was "no material event or matters related to its business operations" to cause the abnormal activity.
Trading resumed at 11:45 a.m. – about two hours after the halt – and the stock quickly recovered nearly all of its losses.
IIROC said it won't comment on specific trading halts, but pointed to its policy of cancelling trades under certain conditions, including an "erroneous" trade.
A handful of brokers contacted Tuesday pointed to a trading error as the probable cause of the fall, which explains the quick rebound in the stock price and the regulator's decision to cancel trades.
It was unclear Tuesday whether the mistake was a so-called "fat finger" error, which is when a person presses the wrong key on a computer when inputting data, or the result of an error in an automatic trading program.
Tuesday afternoon, Inter Pipeline said it was still seeking answers from regulators on exactly what happened on Monday.
"It wasn't a pleasant experience for our investors," said Tony Mate, Inter Pipeline's director of corporate and investor communications. He called the temporary and unexplained stock drop "a very big deal for investors."
"The trading platform and the trading activity, that's something that the TSX has to explain," said Mr. Mate. "Thankfully, there was nothing amiss with our business."
Len Racioppo, managing director of Coerente Capital Management Inc., said these types of trading errors are cause for concern. "I don't think there's any room for that kind of accident," said Mr. Racioppo, whose company owns Inter Pipeline shares but didn't trade on them Monday.
"Anything that reduces the confidence level of the average retail investor is not good for the health of the capital markets."
Macquarie Securities Group analyst Robert Catellier said it was immediately apparent that it was a trading error that caused the swoon in Inter Pipeline's units.
While the units haven't fully recovered from where they opened on Monday, Mr. Catellier believes investors may still be slightly cautious about the impact of Alberta's flooding on pipeline companies in the region.
"Time will help … but it looks like the industry in general and IPL in particular has avoided what could have been a much worse situation," he said.
In the wake of the Monday plunge, some investors expressed concern that the Alberta floods may have damaged Inter Pipeline facilities. But the company said its Cochrane Extraction Plant, which is its closest operation to the flooded area, is on higher ground and was never in danger of being damaged.