BATS IPO Algorithmic Snafu?

So, um, what happened with the BATS IPO?

Electronic stock exchange operator BATS Global Markets was forced to abort its US$80m IPO after embarrassing technical difficulties on its own exchange tarnished its planned debut.

It all happened so fast, it seems like nobody's really sure what happened.

"As a result of this systems issue, three erroneous trades occurred on the BATS BYX Exchange in Apple Inc. (APPL), one of which caused a volatility halt in that stock," the company said in a statement. "The erroneous trades were broken under BATS' clearly erroneous trade policy."

I guess there's erroneous, and then there's clearly erroneous?

What we know for sure is that something happened, and then we took action.

"In the wake of today's technical issues, which affected the trading of certain stocks, including that of BATS, we believe withdrawing the IPO is the appropriate action to take for our company and our shareholders," said Joe Ratterman, CEO of BATS Global Markets.

ZeroHedge says this is just another case where "an algo very obviously went insane".

We wish to thank BATS exchange (which is no longer content with busting the NBBOs in the US, it has now also decided to go after Chi-X in Europe) for allowing this vivid demonstration of a mini flash crash in action, in which there is absolutely no fat finger, no Greek parliament to blame the crash on, and is merely a function of a busted HFT algo which ends up making a mockery of the price discovery process.

The generally sober and sensible Felix Salmon tries to make sense of it all:

They’re not going to try that stunt again in a hurry; as finance professor James Angel told Bloomberg, this was “like seeing an airplane crash on takeoff”. On the maiden flight of a new airline. You can imagine how much appetite anybody would have to fly that airline thereafter.

And Bloomberg agrees, the way stocks trade in America doesn’t work

A Bats computer that matches orders in companies with ticker symbols in the A-BFZZZ range “encountered a software bug related to IPO auctions” at 10:45 a.m. New York time, the company said in an e-mailed statement explaining its trading problems. The glitch made existing customer orders for those symbols unavailable for trading, the document said.

Aw, what the heck, it's springtime, who cares if nobody understands how the financial system works anymore...