Color us skeptical when it comes to all the blather blaming yesterday's sell-off on a computer glitch. Or glitches. Why? Because it seems the main thing that caused the computer glitch was so many sell-orders pushing through the system at once. If selling caused the glitch, how could the glitch cause the selling? Okay, maybe there's a sequential, feedback loop thing going on here but isn't it a little too soon to confidently point the finger at the robots?
The Wall Street Journal has some interesting reporting about what happened when the electronic trading systems broke down. Most the the tale, of course, comes from floor traders who, of course, mostly fear and loathe the robotic masters who are threatening their jobs. So you probably want to discount some of the "manual process which never breaks down" talk for self-interest from the people new NYSE executive Duncan Niederauer once reportedly referred to as "five guys named Vinny."
After the Dow problem was resolved, other woes bedeviled traders. About a half hour before the closing bell rang at 4 p.m. Eastern time, traders reported having problems sending electronic buy and sell orders to the NYSE, which recently began converting to a largely electronic system.
At one post on the floor, traders resorted to writing buy and sell orders on a dry-erase board. Most of the letters next to the stock symbols said "S," for "sell."
"Go manual if you can," said Art Cashin, a longtime floor broker for UBS, to traders at about 4 p.m. "Take paper if you have to."
Traders were still negotiating stock closing prices 10 minutes after the 4 p.m. close. "You're done, 50 grand at 74.20," Michael Rutigliano, a floor broker at the NYSE, yelled into his headset shortly after the markets were supposed to have been closed.
Mr. Rutigliano reflected the frustration floor traders are feeling these days, as their role becomes diminished by the electronic age. "We were able to revert to a manual process that never breaks down," he said.
Louis Pastina, an executive overseeing trading systems at the Big Board, said "a rush of orders" in the last hour of trading overwhelmed the exchange's computers, leading to delays and an unknown number of orders that were never completed. Some trades may have been done on alternative markets or in an after-hours crossing session the NYSE extended by a half hour to 5:30 p.m., he said. He added that floor traders were finishing trades manually until around 4:25 p.m., about 20 minutes later than usual.
A spokesman for the NYSE said the new hybrid trading system -- which matches most trades electronically but sends some to traders on the exchange floor -- worked fine, but that another system that feeds it couldn't handle the onslaught of orders.
After a Rough Morning, A Data Backup Jolts The Blue-Chip Average [$$] [Wall Street Journal]