Legitimate or not? NYSE lets stand trades in utilities American Electric Power (AEP) and NextEra Energy (NEE), but removes many trades from the tape.

The NYSE has let stand all trades in AEP and NEE. But in an additional decision that is raising eyebrows, it has decided to remove all trades from the tape that were roughly three to four percent below the opening price.

To recap: AEP opened at $48.18, just below the prior close, but quickly traded down on several exchanges to as low as $22.28.

NEE opened at $78.62, also just below the prior close, but quickly traded down to as low as $30.37.

NYSE officials quickly met to review whether any of those trades should be busted under the clearly erroneous trade rule, which allows trades to be busted if there is a mistake in the order. The rule is very clear: "A Clearly Erroneous Execution ("CEE") is an execution with an obvious error in any term, such as price, number of shares or other unit of trading, or identification of the security."

Was there an error made? The NYSE determined that the trades were based on market orders, limit orders, and stops that drove pricing down. In other words, legitimate orders.

The trades stand. Even the ones for AEP at $22.28 and NEE at $30.37.

OK, fair enough. They were legitimate orders, and the trades stand. Here's something that bugs me: the NYSE also said that all trades in AEP at or below $46.03 between 09:30:00 a.m. and 09:31:00 a.m. and all trades in NEE at or below $76.19 between 09:30:00 a.m. and 09:31:00 a.m. will be marked with an Aberrant Report Indicator.

What's that? Let the NYSE explain: "The NYSE notes that executions at these prices are still valid trades, but they will be excluded from the high and low data disseminated by the Consolidated Tape Association."

Huh? You mean the trades are still valid but the worst ones will never appear on the tape? That's exactly what it means.

Why? I am going to speculate: imagine being AEP. You're a dull utility. Investors buy your stock for yield and stability. Suddenly the whole world knows you had a trade at $22 and change, when your stocks was $48. It might make some think you're too volatile to own. Screaming executives.

The NYSE is now caught between a rock and a hard place. They have a stupid circuit breaker rule that does not allow circuit breakers to be used at the open (see below) that was forced on them and all the exchanges by the SEC, so it's not really their fault. But they have to mollify a customer--in this case, AEP and NEE. What to do?

Let the trades stand, but declare that the worst ones are "aberrant." No one sees them.

Sorry, I understand the dilemma, but this doesn't smell entirely right. Is it a legitimate trade or not? If it is, it shouldn't be hidden.

The companies are not happy. Moray Dewhurst, Vice Chairman and Chief Financial Officer, NextEra Energy, Inc., sent in the following statement to CNBC: "We are continuing to try to understand exactly what happened in the first few minutes of trading in our stock this morning. This is naturally a concern for all our shareholders and potential shareholders. This type of market behavior is not what we would expect from a well-functioning and well-regulated exchange."

Move on: how did this happen in the first place? There are two problems:

First, there is no circuit breaker protection for individual stocks between 9:30-9:45 a.m. ET and 3:30-4:00 p.m. ET. In other words, right after the open and right before the close.

During the rest of the day, the new circuit breakers (known as Limit Up, Limit Down) put trading halts on stocks that drop more than five percent in the prior five minutes.

Circuit breakers with full protection for the entire day (9:30-4:00) comes into effect on August fifth.

August fifth? That is no consolation. There is a major rebalancing at the close next week, and traders are nervous that could cause problems.

Don't blame the NYSE nor the NASDAQ: this was an SEC ruling. ALL the exchanges objected to not having circuit breakers in effect at the open or the close, but they were overruled by the SEC. Why? Not clear, but the SEC probably felt that they were unsure how well the new circuit breakers (which came into effect a few months ago) would work in the real world and wanted to avoid having them during the two most volatile times of the day.

That was wrong thinking: the circuit breakers have worked well. If they were in effect at the open--or the old NYSE circuit breakers were in effect--the problems with AEP and NEE would not have happened.

Second, books are thin. The opens are notoriously thin; there is very little stock to buy or sell on any of the order books.

Why did it happen with these two stocks? It's not clear, but it's likely the mix of market orders on top of unusually thin books. Remember: unless traders put a stop order in, a market order can quickly deteriorate.

This happened last week in Anadarko Petroleum (APC), when three large sell orders hit the tape in the last minute, causing APC to go from $90 to some trades that were executed at a penny. The NYSE then stepped in under the clearly erroneous trade rule and canceled all trades below $85.76, which was several percent below the last trade. So those trades were deemed a mistake.

Check out which companies are making headlines after the bell Thursday:

Retailer Gap reported first-quarter earnings of 71 cents per share, beating forecasts for 69 cents, as same-store sales rose 2 percent. Shares were lower in extended hours trading.

Pandora shares jumped in after-hours trading. The online music-streaming service reported a first-quarter loss of 10 cents a share on revenue of $128.5 million. Analysts had expected a loss of 10 cents a share on $124 million in revenue. For the second quarter, Pandora forecast between a loss of 2 cents and a profit of 1 cent on revenue of $155 million to $160 million, above expectations.

Take a look at some of Thursday's midday movers:

Sempra Energy (SRE) was the worst performer on the S&P 500 after the energy company lowered the top end of its guidance for 2013 and offered a weak outlook for 2014.

Shares of software game maker Electronic Arts trended higher. A Morningstar analyst suggested that improved functionality of Microsoft's Xbox One may benefit makers of sports games. Stifel Nicolaus raised its price target on Electronic Arts to $26 from $22.

Have two Pandora's Boxes been opened? Fed Chairman Ben Bernanke may have opened the first one. No matter that it is highly unlikely economic data will come in showing sufficient strong and sustained growth to justify tapering bond purchases any time soon — markets see it differently.

The bond market is wound so tight that even raising the remote possibility of ending tapering of bond purchases has thrown prices into a tizzy.

Check out which companies are making headlines before the bell on Thursday:

Hormel Foods — Hormel earned 46 cents per share for its second quarter, three cents below estimates, with revenues also short of consensus. The food producer was impacted by weakness in the Jennie-O Turkey segment, as well as lower profit margins and higher overhead costs.

Hewlett-Packard — HP reported fiscal second quarter profit of 87 cents per share, excluding certain items, six cents above estimates. Revenues were short of consensus forecasts, but HP raised its full year guidance above analyst projections. The computer maker is having some success increasing its sales of enterprise computing services.

Volatile trading in stocks and bonds could continue as investors sort out what's going on with the Fed and whether markets have come to some sort of inflection point.

That makes every bit of economic data even more important, since the Fed has made clear its path will be determined by the progress of the economy, and employment in particular.

(Read More: Pisani: Traders Overreact to Bernanke's Testimony)

Thursday's reports include weekly jobless claims at 8:30 a.m. ET; U.S. manufacturing PMI at 8:58 a.m..; FHFA home prices at 9: a.m. and new home sales at 10 a.m. U.S. markets will also be watching PMI data for China and the euro zone.

Check out which companies are making headlines after the bell Wednesday:

Traders chase both sides of Fed debate.

Is this a signature day for the markets? Not clear yet, but a couple data points: 1) heavy volume, 2) spike in volatility, and 3) a key paragraph from the FOMC Minutes:

"A number of participants expressed willingness to adjust the flow of purchases downward as early as the June meeting if the economic information received by that time showed evidence of sufficiently strong and sustained growth; however, views differed about what evidence would be necessary and the likelihood of that outcome."

Uh-oh...they mentioned a June meeting! It's over! Aargh!

Hold on: "views differed about what evidence would be necessary and the likelihood of that outcome."

They can't even agree on what evidence would be sufficient for them to begin tapering! With the voting members heavily weighted toward doves, does anyone think the Fed is going to taper in June? Anyone? I didn't think so.

In my informal, unscientific surveys of traders, only about 25 percent of the traders I talk to believe the Fed might begin tapering by September; the majority believe they will not do so until 2014.

They could be wrong, but unless we see Nonfarm Payrolls over, say, 250,000 for the next three months, I too think it is unlikely the Fed starts tapering in the next few months.

Instead of asking, "Why did we drop midday?," let me turn this around and ask, "Why did the Dow move up 150 points right after the Bernanke testimony--why were we up in the first place, given that Bernanke was very balanced?"

The answer is, traders are chasing both sides of the story.

The guys who believe the economy is weak--and that the Fed will not move before 2014--point to comments from the Fed minutes like, "Many on FOMC Wanted to Wait for Stronger Data Before Tapering," or "Many on FOMC Said More Progress Needed Before Slowing QE Pace."

Note the phrase, "many."

But many are now trying to position themselves hawkishly and are trying to drag the market in their direction.

Finally, several have asked why the market sold off at 1:00 p.m. ET--an hour before the Fed minutes. Silly theories that "someone knew something" aside (please), news of a police officer being killed--and hacked to death--in London--along with disturbing video of one of the apparent killers with blood-soaked hands--may have been a factor in the markets drop.

Take a look at some of Wednesday's midday movers:

Stocks were boosted by Fed Chairman Ben Bernanke's Congressional testimony about the economy and monetary policy, but came off highs as he discussed when the Fed might start paring back on its bond buying program.

Nine of the ten large-cap S&P 500 sectors were in the green at midday. Health care was the best performer, while utilities dipped into the red.

Trading in stocks and bonds was highly volatile after Fed Chairman Ben Bernanke discussed how the central bank might wind down its monetary easing policy, and Fed minutes later showed a group of Fed officials were ready to move ahead with paring back.

Stocks and bonds both were both lower in late trading, after initially rallying hard Wednesday on the Fed chairman's initial testimony before Congress, which the markets took as a sign that "tapering" of the Fed's $85 billion a month bond purchase program was off the table for now. Discussions about tapering have been fanned by hawkish Fed officials who have said they believe paring back the program should happen sooner rather than later, and in one case as early as June.

But when Bernanke was questioned by the Joint Economic Committee on specifics of the timing of tapering, the markets did a double take, with stocks moving well off their highs and Treasurys selling off. The Dow sank 100 points, and the 10-year Treasury yield snapped above 2 percent, its highest level since March. Gold was trading down nearly $8 at $1369 at midday, but it too had been jolted higher by Bernanke's initial comments, rising to $1413.