Trader's error causes Cebu Pacific shares to fall 38%

MANILA, Philippines – Budget airline Cebu Pacific Air (CEB) encountered turbulence on the trading floor as its shares dropped by a whopping 38% on Tuesday, July 9, over what analysts see as a trader's error.

From around P90 apiece, CEB's stock price closed at just P58 – a wipeout of around P21 billion. The closing price is also nowhere near its 52-week range. 

10-day chart by PSE

The order happened during the bourse's no-cancel period before the end of trading.

Brokerage firm COL Financial addressed queries and told investors that the large decline 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. 

Dynamic threshold prices limit the posting of orders to a certain range of prices based on the last traded price of the stock. 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.

A Bloomberg article reported that Quality Investment & Securities Corporation was the biggest seller of the stock and caused the error. 

The company confirmed to Bloomberg that it did not mean to sell CEB shares. – Rappler.com

Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.

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