With liquidity still in short supply in equities and exchange-traded funds after the reopening of markets Wednesday, NASDAQ cancelled all trades in the first two minutes of activity in the Vanguard S&P 500 Growth ETF (VOOG).

The cancellation applied to issues that were selling below $65.87 and cannot be appealed, the exchange operator said, in a market notice. It said: "MarketWatch has coordinated this decision with other UTP Exchanges. NASDAQ will be cancelling trades on the participants’ behalf."

“Erroneous trades in ETFs happen from time to time, particularly with less liquid ETFs such as VOOG.” notes Michael Rawson, ETF analyst with Morningstar, Inc. “This is why we recommend large trades to use limit orders on ETFs.

 “I would say that the trader and market maker screwed up. The trader probably used a market instead of the limit order and rushed it or rammed it through too quickly. The market maker must not have been watching the book.”

Liquidity issues with small ETFs are fairly common, Rawson notes. “I would not blame Vanguard.”

The cancellation was pursuant to rule 11890 (b) which allows NASDAQ to terminate trades it adjudges to be clearly erroneous.

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