In what was described by analysts as a trader’s error, the shares of budget airline Cebu Pacific Air (CEB) on Tuesday plummeted on the trading floor by a massive 38 percent – a wipeout of around P21 billion.
In a statement, Brokerage firm COL Financial said that the large decline – from a P90 apiece CEB stock price to just P58 at the close that happened during the bourse’s no-cancel period before the end of trading – may likely have been caused by a trader’s error.
“Given that the PSE (Philippine Stock Exchange) removes dynamic thresholds during closing periods, it does open the stock to be vulnerable to these types of mistakes,” COL Financial said, adding that the closing price is also nowhere near its 52-week range.
Dynamic threshold prices limit the posting of orders to a certain range of prices based on the last traded price of the stock and these price limits are set by the PSE and are shown in the stock’s price quotation.
Dynamic thresholds are only in effect during the market open at 9:30 am until the pre-close periods between 3:15 pm and 3:20 pm. The threshold function is not in effect beyond this period.
“Without such thresholds, the security is open to move within the extreme limits of the day’s price ceiling and floor, which is 50% over or below the previous day’s close,” COL Financial said.
“Prices should try to normalize itself into the next trading day or so,” it added.
Meantime, a Bloomberg article reported that Quality Investment & Securities Corporation was the biggest seller of the stock and caused the error and it confirmed that it did not mean to sell CEB shares.