Citigroup Mistake Sends QQQQ Shares Higher

Citigroup Inc. mistakenly bought and sold hundreds of thousands of option contracts on the Nasdaq-100 tracking stock on the Pacific Exchange on Tuesday, leading to price swings in the stock market.

New York-based Citigroup, a specialist in options trading at the Pacific Exchange, received an “incorrect price quote from a third-party data vendor, which we resolved within seconds,” spokeswoman Danielle Romero-Apsilos said.

Romero-Apsilos declined to identify the vendor but said the effect was minimal.

“To the best of our knowledge, no client was negatively affected,” she said.

At about 7:57 a.m. Pacific time, Citigroup’s computers mispriced contracts on the Nasdaq-100 shares, known by their QQQQ symbol, said Jeff Shaw, head options trader at Timber Hill, a Greenwich, Conn.-based market maker.

At least 500,000 contracts changed hands within seconds because of the error, according to data compiled by Bloomberg. Timber Hill was the other party in about 120,000 of them, Shaw said.

The stock market “spiked up” because of the increased activity in the QQQQ options, said trader Larry Peruzzi at Boston Co.

Trading in the options set off buying in the QQQQ shares, the most active U.S. equity security. The stock, which had been trading at $38.30, rose as high as $38.45 after the trades took place. They later erased the gain and closed at $38.12, up 25 cents, on Nasdaq.

The Standard & Poor’s 500 index climbed as much as 0.5% after the options trading and gave up the gain as the transactions were canceled. The benchmark rebounded to end the day 0.3% higher.