Computer glitch results in volatile trading for Wells Fargo, RBS; Affiliated Managers prices

By Stephanie N. Rotondo

Phoenix, Aug. 1 - The equity markets were rattled Wednesday by a computer glitch at market maker Knight Capital Group that resulted in confusing trading.

A trader said about 150 New York Stock Exchange-listed securities were affected including at least two preferred stock issues: Wells Fargo & Co.'s 5.625% trust preferreds and Royal Bank of Scotland Group plc's 7.65% series F noncumulative dollar preference shares.

The technical issue resulted in higher-than-usual volume for the securities as well as volatile price changes.

The NYSE has said it will review trading in at least 143 securities and that trades in at least six issues will be canceled. The Wells Fargo and RBS issues were not on that list.

Over in the primary arena, Affiliated Managers Group Inc. announced plans to issue $25-par senior notes due Aug. 15, 2042. At least $100 million of the notes were expected to be sold, and price talk was between 6.5% and 6.625%. The deal came upsized at $200 million and at the tight end of talk.

In recent deals, BB&T Corp.'s $1 billion of 5.625% series E noncumulative perpetual preferreds officially listed on the NYSE. A source said the issue was among the day's most actively traded preferreds.

Glitch shuffles Wells, RBS

A computer glitch at Knight Capital early Wednesday resulted in unusual trading activity for as many as 150 NYSE-listed securities.

Those securities included Wells Fargo's 5.625% trust preferreds (NYSE: JWF) and Royal Bank of Scotland's 7.65% series F noncumulative dollar preference shares (NYSE: RBSPF).

The trader said the Wells Fargo issue - which had closed at $25.56 on Tuesday - traded as low as $22.80 due to the algorithm error.

"Volume is crazy," he added. The issue saw about 4 million preferreds change hands. Volume the day before was around 48,000 preferreds.

If there are determined to be erroneous trades, he said that usually the price would be knocked down 10% from previous levels, meaning investors would have to pay around $23.00 for the preferreds. However, he opined that perhaps there would not be any canceled trades in the Wells Fargo issue.

The same could not be said for the RBS securities, however.

"They'll be some canceled trades on that probably," he said, noting that trading had been halted.

He also noted that the RBS issue had been pushed up, not down like the Wells Fargo issue. The paper hit a high around $29.00 and change, he said.

At midday, the Wells Fargo trust preferreds were trading at $25.15, down 41 cents, or 1.60%. The RBS series F preferreds were up 91 cents, or 3.82%, at $24.75.

By the end of business, Wells Fargo's trust preferreds were down just 35 cents, or 1.37%, at $25.21. The RBS paper closed up 86 cents, or 3.61%, at $24.70.

Due to the trading issues, Knight instructed clients to take their trades elsewhere until the problem is corrected. Knight could be on the hook for legal damages if the unintended trades are forced through.

The Jersey City-based market maker did not return calls seeking comment.

Ally rises post-earnings

In other secondary dealings, Ally Financial Inc.'s preferreds were heading higher following the release of the company's second-quarter results.

The 8.125% series 2 fixed-to-floating-rate trust preferreds (NYSE: ALLYPA) gained 8 cents, closing at $24.46, and the 8.5% series A fixed-to-floating-rate perpetual preferreds (NYSE: ALLYPB) moved up 15 cents to $23.39.

Ally reported an $898 million loss for the quarter due to a $1.2 billion charge taken in regards to its bankrupt Residential Capital LLC unit.

Affiliated brings new deal

Affiliated Managers Group priced a $200 million offering of 6.375% $25-par senior notes due Aug. 15, 2042, a trader told Prospect News on Wednesday.

The deal was increased from $100 million.

The trader saw a $24.95 bid, par offer in the gray market at midday.

After pricing, another market source echoed that market.

The joint bookrunning managers are Bank of America Merrill Lynch, Wells Fargo Securities LLC and Deutsche Bank Securities Inc. The co-managers are RBC Capital Markets LLC, Mitsubishi UFJ Securities (USA) Inc., RBS Securities Inc., Scotia Capital (USA) Inc. and U.S. Bancorp Investments, Inc.

Proceeds will be used in part to pay down a revolving credit facility. Any remaining funds will be used for general corporate purposes.

Affiliated Managers is a Prides Crossing, Mass.-based asset management company.

BB&T lists

BB&T's new 5.625% series E noncumulative perpetual preferreds officially listed on the NYSE on Wednesday.

The ticker symbol is "BBTPE." The deal priced July 24.

At midafternoon, the securities were trading at $25.38, up 6 cents from opening levels.

By the close, the paper was up a penny at $25.33.

BB&T is a Winston-Salem, N.C.-based financial institution.

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