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."

Comments

Chaos theory, anyone?

[pzs]

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

Dropping prices versus dropping data

[G4from128k]

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.