Moments of Terror: A View From The Trading Desk

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It was a day that went from ordinary to absolutely terrifying in a matter of seconds, according to a trader who spoke with DealBreaker earlier tonight on the condition that we not identify him or his workplace. The giant plunge in the stock market averages late on a chilly Tuesday afternoon had traders wondering if some sort of cataclysm had struck, the trader explained just three hours later.
"Our first thought was that they blew up Grand Central, or the Empire State building, or the GW," the trader said.

A Bearish Day Turned Terrifying

Just moments before the plunge it appeared to be a quite normal day, albeit one especially friendly to bearish traders such as the one we spoke with tonight. A few computer glitches seemed to be slowing down trades. The bears were running with comments about a recession from former Federal Reserve chairman Alan Greenspan and a market downturn in China. The market was on a steep sell-off, but there were few signs of what was to come.
"We're all at the desk, long, short, trading, trying to squeeze a dime from a nickel, watching the stock market tick down," said the trader. "We're at two hundred. Two-seventy. Two-ninety. Soon we start having software problems. Especially with NYSE stocks. It was the crazy volume they were having today. Everything is slow."
"Then we get a print out nowhere, saying Dow at 470. We couldn't tell whether this was for real or some sort of screw-up," he continued. "I'm on instant messaging. In a chat room with like 75 other traders. Everyone asking whether this was for real. Then CNBC comes on saying Dow down 500. In one tick the market dropped two hundred and fifty points."
Dow Jones would later blame the sudden downturn on a technical problem. The high volume in trading had apparently caused a slowdown in the computers which calculate the Dow Jones Industrial Average. When the secondary computer systems were brought online, the backlog of trades pushed through all at once, pushing the average down hundreds of points, Dow Jones said.

Fears Come Alive

Traders had heard a few hints that a possible terrorist attack or international incident was coming. But years of color-coded alert changes, high-profile press conferences warning of attacks that never happened and uncountable rumors of impending doom have taught many traders to filter this out as noise competing against real market signals.
"We had heard whispers of bomb scares on the subway," the trader told us. "But we weren't focused on that until we saw the Dow numbers."
"People were saying it was the Empire State building but I can see that from my office. I would have heard it. I knew that wasn't it. I thought Grand Central or the GW," he said.

Goldman Falls Off The Cliff

All of the components of the Dow Jones were down for the day. Stocks that had long been staples of the bull market saw their prices drop. Shares in Goldman Sachs were trading down several dollars.
"Goldman fell six bucks. People were going nuts. There were no bids for five or six points. We haven't seen that kind of thing for years. This was no high-flying tech stock. It was Goldman-fucking-Sachs," the trader said.
"For a minute I wondered if they had blown up Broad Street. Maybe Goldman Sachs no longer existed," he said.

A Profitable Day For Shorts

Even in the biggest downturns, however, a well-positioned trader can make money by shorting stocks and riding the downward momentum toward profitability. Sometimes money is made because of skill. Sometimes it's luck.
"It was a great day for some of us. I'm a bear. Some of us made more than we had in years. I know people who lost money, of course. It was that kind of day," the trader said.
"But, regardless of my positions, you know what I felt when I saw that drop of 500 points?" he said. "I felt goosebumps. I thought it's an attack. A building. A bridge. I'm a bear but this was a totally unexpected, out of left field."
In the moments after they saw the drop, the trader didn't rush to his terminal to push through new positions. He waited for news about what had caused the unexpected and unprecedented (at least in recent years) plunge.
"We were waiting for CNBC to flip to a CNN feed showing an attack. Looking at Bloomberg. Hitting refresh on DealBreaker. Waiting to see who would have the scoop with what was going on," he said.
As we concluded our conversation the trader asks us if we knew what had caused it. "Was it some sort of technically triggered sell-off?" he asked.
We told him that Dow Jones was blaming a computer glitch.
"So that's the line," he said.
Before we hung-up the phone he reiterated the physical sensation of fear he had felt. "Goosebumps," he said. We wrote down in our notebook that despite all the talk about terrorism, attacks and buildings collapsing he had never mentioned the words "nine-eleven" or the date "September Eleventh."

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