Midday Commentary: Trading glitch causes confusion for some preferreds; Glimcher prices deal

By Stephanie N. Rotondo

Phoenix, Aug. 1 - The equity markets took a hit early Wednesday as a computer glitch at market maker Knight Capital Group 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 (NYSE: JWF) and Royal Bank of Scotland Group plc'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 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.

Due to the trading issues, Knight has 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.

Glimcher prices

Over in the primary arena, Glimcher Realty Trust priced a $90 million sale of 7.5% series H cumulative redeemable perpetual preferred shares of beneficial interest.

A trader said there was a $24.75 bid early in the day but no offers. The bid then climbed up to $24.80, but again, offers were few and far between.

Also, Affiliated Managers Group Inc. said it will issue $25-par senior notes due Aug. 15, 2042. At least $100 million of the notes are expected to be sold, and price talk is between 6.5% and 6.625%.

Pricing is expected either later Wednesday or on Thursday.

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

In recent deals, BB&T Corp.'s $1 billion of 5.625% series E noncumulative perpetual preferreds officially listed on the New York Stock Exchange 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.

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