NASDAQ investigates huge plummet in Google stock price

For a while there yesterday, it looked like all tech stocks–Apple, Cisco, HP, Yahoo–were rebounding nicely

from Monday’s unprecedented 777-point stock market drop. That is, all of them but Google. Google saw its stock gain strength, rising from the opening price of $396 to about $425 a share, until about 4pm ET, when in 5 minutes, it lost about 70% of its worth. In fact, the stock was trading at just $25.80 at one point.(Talk about getting in on the ground floor.)

The plummet was so huge and fast that the NASDAQ launched an immediate investigation, which concluded that the volatility was all due to one trader’s error. According to a NASDAQ spokesman:

“A market participant sent in a large number of orders and drove the price down at approximately [3:57 p.m. ET] which caused the bid-offer to be artificially low due to their mistake.”

The exchange adjusted Google’s closing price to $400.52 (up from the $341.43 it hit after the “mistake”), and cancelled all trades made at or above $425.29 and at or below $400.52 that took place between 3:57 pm ET and 4:02 pm ET. So from NASDAQ’s point of view, all’s well that ends well. But in such rollercoaster market times, perhaps NASDAQ–an entirely electronic exchange–should be wondering how just one “market participant” could wreak such havoc. While Google seems to have escaped relatively unscathed, NASDAQ should consider putting better safeguards in place.