Friday afternoon was a wild one for shareholders of Nexen Inc.
In just five minutes, the company's shares plummeted from about $25.20 down to around $21, only to shoot back up to $23.75. Trading was then halted for roughly four minutes.
Soon after, rumours started floating around that some of the trades would be cancelled, but no one was quite sure how much this would affect the afternoon's total activity.
Now that the dust has settled, it turns out that only about 200 trades have been cancelled, according to the Investment Industry Regulatory Organization of Canada, out of 56,174 Nexen trades executed that day. These trades were affected by a single stock circuit breaker halt, a new rule implemented after the Flash Crash of 2010.
In Canada, trading is halted when a company's share price falls by 10 per cent within a five-minute period. All trades executed at more than 5 per cent beyond the price that triggered the halt are cancelled, and in Nexen's case, these amounted to about 200 orders.
Looking back, Nexen's trading activity was especially wild just before the market closed because the shares moved in the wrong direction. Any investors who sold because they thought the deal would be blocked got a rude awakening about 90 minutes later. So what made them think this way? It's still a bit unclear, but one theory is that traders got spooked by the news that Prime Minister Stephen Harper would deliver a speech, convincing them that what he had to say would not be good. There's also a good chance that some sort of electronic algo trading accelerated the selling once the first few people got spooked.
Had the shares shot higher, there would be a serious need for an investigation into a possible leak. But just like the Potash Corp. of Saskatchewan Inc. decision, as well as the BCE-Astral ruling, the market had very little to trade on, other than best guesses.