August 1, 2012 / 9:53 PM / 7 years ago

Knight problems send Wizzard on a wild stock trading ride

NEW YORK, Aug 1 (Reuters) - Wizzard Software Corp, the little known maker of speech recognition software, was the most roiled stock in a trading glitch that ripped through the New York Stock Exchange on Wednesday.

Thanks to technology issues at trading firm Knight Capital Group Inc, Wizzard Software saw its composite trading volume spike to more than eight times its 50-day average of a bit less than 53,000 shares.

The stock closed at $3.50 on Tuesday. But as a result of a slew of orders, prices on the stock escalated within minutes, steadily rising on from an opening price of $3.60 to $14.76, the highest price for the stock since December 2008.

The New York Stock Exchange announced late in the session on Wednesday that it will cancel all trades on Wizzard at or above the $4.68 price.

Most of the trades were 100 shares each and its $14.76 peak represented a move of more than 300 percent from the day’s low. Each trade of 100 shares seemingly boosted the stock price higher, likely as a result of the technology issue, resulting in either huge gains for the sellers or severe losses for the buyers as the stock plummeted to back under $5 per share.

In most of these cases, nearly every bid was hit - that is, where a broker agrees to sell at a price quoted by another broker, suggesting aggressive selling. That sent shares soaring.

According to Thomson Reuters data, Wizzard shares rose from $10 to the high of $14.76 in a span of three seconds - with 87 trades of 100 shares and one trade at 400 shares.

The 88 trades combined for a total volume of 9,100 shares, which would have resulted in a net profit of $74,628.01 if the stock had been sold after purchasing it at its Tuesday closing of $3.50 per share.

Heavy computer-based trading erupted at the open, causing a trading halt in a handful of New York Stock Exchange-listed shares due to excessive volatility and prompting the NYSE to review trades in 140 different issues.

Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey, said he noticed similar trading in a number of shares.

“We noticed every bid was getting hit, and it went on for about a half an hour,” he added.

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