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Dow Jones Plunge Fueled by Overwhelmed Computers
cloudscout writes "The Dow Jones Industrial Average dropped over 400 points today. While there were various valid financial reasons for such a decline, some of the blame is being placed on computer systems that couldn't keep up with the abnormally high volume at the New York Stock Exchange and the resulting tremor as they switched over to a backup system."
In the 1929 crash the problem was partially blamed on the ticker tape running at times up to 1 hour late. Before computers there were people you could blame.
- Minutus cantorum, minutus balorum, minutus carborata descendum pantorum.
1. Computer switch-over is a bit slow
2. Market starts to waiver
3. Other parts of the market see this tremor so market waivers a lot
4. Panic ensues
5. Indices drop 10%
6. a pension company goes bust
7. my grandpa doesn't get to eat.
The last few steps are somewhat hypothetical, but still. The stock market must be one of the most immediately visible examples of chaos theory kicking humans in the nuts.
Peter
Considering the amount of, and importance of, data that flows through that system... I am surprised that it's not routinely well ahead of the needs at peak capacity.
I'd say that someone, likely the one in charge of the IT budget approval, keeps tight purse strings. Of course, he's not the one getting reamed, it's the CIO and his crew who are taking the blame even though they have repeatedly requested the funds to improve the system. Just speculation, but likely spot on.
Just another piece of ammo when I start a new job and demand a reasonable budget.
Sometimes the best solution is to stop wasting time looking for an easy solution.
The problem was obvious to anyone watching the markets. A trace of the Dow versus the S&P showed that the Dow's drop was NOT keeping pace with the drop in the S&P (they are normally tightly correlated, especially when big moves occur). It was clear that the NYSE's computers were woefully behind on reporting a much more orderly and steady drop. When that backup server cut in, the Dow data suddenly reflected the true state of affairs that was obvious from people watching the S&P and the broader market.
The Dow did NOT drop 200 points in minutes, the data simply caught up with the drop that had already occurred.
Two wrongs don't make a right, but three lefts do.
Yep - that sounds just about right.
Imagine a series of database transactions, with each step getting queued up and waiting for the system to finish processing it. The actual DOW number reflects fully completed transactions, but not pending transactions that might impact the outcome. This is probably a good thing, as a transaction might end up being rejected, so you only want to show the outcome of completed transactions. Once the backup system came online, the transactions quickly finished being completed, resulting in the dramatic drop.
The amazing thing to me is that the system is robust enough that transactions can survive the loss of their main computer system and bringing up a secondary one. That's database, networking, and coding voodoo, all wrapped into something pretty awe-inspiring.