What Happened to the NYSE Arca?

what happened to the nyse arcaIf you're invested in an exchange-traded fund (ETF), you're probably wondering what happened to the NYSE Arca exchange yesterday (Monday, March 20) - and how your money was affected.

Near the 4 p.m. closing bell yesterday, a glitch prevented more than 1,000 funds listed on the NYSE Arca from closing by traditional auction. In other words, the NYSE Arca had a system error during the critical final minutes of trading when the exchange determines each fund's closing price.

This error affected millions of ETF traders and investors. After all, market participants use closing prices as a key influence in their buying and selling behavior the following session. If they don't know the settlement price of an ETF, their ability to hedge could be negatively affected.

Here's what happened to the NYSE Arca during the last minutes of trading yesterday...

A Timeline of the NYSE Arca Glitch

According to The Wall Street Journal, NYSE Arca first notified investors at 4:07 p.m. - seven minutes after market close. The exchange gave an alert saying "all live orders will be canceled." Then, at 4:13 p.m., post-market trading on all NYSE Arca-listed funds was suspended.

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At 4:37 p.m., the exchange said each affected ETF's closing price would be determined by taking its volume-weighted average price during the session's last five minutes. If no trades happened in that five-minute window, the closing price would be based on the fund's consolidated last sale. If that number wasn't available, it would simply revert to the closing price from the Friday, March 17 session.

Because the volume-weighted average price wasn't the actual closing price, there's no way to know for sure if it was a better or worse price for each ETF. Investors may have earned a bigger or smaller return without ever knowing for sure.

As the world's largest exchange for ETFs, the NYSE Arca glitch is being considered the biggest trading error of 2017. ETFs are among the most popular investment classes, and roughly 92% of all exchange-traded products listed in the United States trade on the NYSE Arca.

Here are some of the most popular funds that were affected by the NYSE Arca system error...

What Happened to the NYSE Arca-Listed ETFs? Here Are 5 of the Largest

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Vanguard Total Stock Market ETF (NYSE Arca: VTI)

This $75.8 billion ETF follows the performance of the most valuable companies on the stock market. These include everything from tech giants like Apple Inc. (Nasdaq: AAPL) and Alphabet Inc. (Nasdaq: GOOG, GOOGL) to conglomerates like Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B). VTI has an average daily volume of about $264.7 million. Its official closing price provided by the NYSE was $122.27, marking a 0.2% loss on the day. Shares have still gained 5% this year.

Because the volume-weighted average price wasn't the actual closing price, there's no way to know for sure if it was a better or worse price for each ETF. Investors may have earned a bigger or smaller return without knowing for sure.

iShares MSCI EAFE Index Fund (NYSE Arca: EFA)

EFA boasts a market cap of $65.7 billion and follows the MSCI EAFE Index, which tracks the performance of large- and mid-cap companies across Europe and the Far East. Although it doesn't hold any North American companies, its $1.03 billion average daily volume is one of the largest of any fund on the NYSE Arca. Shares officially closed at $62.10 yesterday for a 0.2% loss. The ETF has still gained 7.6% since Jan. 1.

SPDR Gold Trust ETF (NYSE Arca: GLD)

With a $33.4 billion market cap, this is the largest ETF in the gold sector. It tracks the spot price of gold using physical gold stored in London vaults. The fund sees an average daily volume of $853.9 million. GLD gained 0.5% yesterday to officially settle at $117.56. It's up 7.7% so far in 2017.

iShares iBoxx Corporate Bond ETF (NYSE Arca: HYG)

This is the largest ETF in the bond sector and has a market cap of $17.2 billion. HYG tracks high-yield corporate debt in the United States, with exposure to the most liquid areas of the junk bond market. However, the fund offers shorter maturity and less exposure to interest rates than junk bonds themselves. The fund has an average daily volume of $938.1 million and fell 0.1% to $87 yesterday. It's slightly up 0.2% this year.

SPDR Dow Jones Industrial Average ETF (NYSE Arca: DIA)

The DIA is a $16.9 billion fund that tracks the Dow Jones Industrial Average. It specifically follows 30 large-cap U.S. companies, the two largest holdings being Goldman Sachs Group Inc. (NYSE: GS) and 3M Co. (NYSE: MMM), respectively. The fund sees an average daily volume of $736.6 million. Shares traded flat yesterday, officially closing at $208.81. However, they're still up 4.9% in 2017.

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Alex McGuire is an associate editor for Money Morning. Follow him on Twitter.

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