Stock Market Sell-Off Might Stem From Trader's Fat Finger

s122604 points out a CNBC story according to which "the catalyst for today's extraordinary price swing (at one point the Dow lost almost 9 percent in less than an hour) may have been because a trader entered a 'B' for billions instead of an 'M' for millions on a trade of Procter and Gamble: 'According to multiple sources, a trader entered a "b" for billion instead of an "m" for million in a trade possibly involving Procter & Gamble, a component in the Dow. (CNBC's Jim Cramer noted suspicious price movement in P&G stock on air during the height of the market selloff).' Unbelievable there are no safeguards to protect against this."

Comments

SELL!

[Skyshadow]

I suspect that I speak for everyone with their retirement money and/or savings invested in the markets when I say: HO-LY SHIT.

Frankly, I was more comfortable with the concept that the DOW could drop 1000 points in one afternoon due to some obscure overseas debt concerns than I am the idea that the DOW can drop 1000 points in one afternoon because of a fucking typo. I realize that markets and the economy in general are collective illusions to begin with and all that, but do we really need to be reminded quite so forcefully?

Might be time to invest my money in something a little more solid, like canned food and ammunition.

Re:SELL!

[Skyshadow]

Yes, why should anyone be concerned that their ability to afford food and heat in their declining years is dependent on the long-term stability of a system that can be radically damaged by a single mistyped letter?

I guess we're all just lucky this guy hit "b" and not "z".

Re:SELL!

[jcr]

If you put anything under the mattress, it shouldn't be US dollars or any other fiat currency. Gold has never gone to zero.

-jcr

Re:SELL!

[MWoody]

You are presented with evidence of a possible global catastrophe in a few hours. You can do one of two things:

1) Quit what you're doing, go eat a pizza or something for your last hours alive. Maybe spend it with your loved ones.
2) Take advantage of the panic to make a profit.

Now, there are two possibilities here, resulting in four outcomes: a) the world ends, b) the world doesn't end.

1a) You're dead. Who cares?
2a) You're dead. Who cares?
1b) You had some pizza, kissed your kids, but hope they don't want to go to college 'cause you're broke.
2b) I'M RICH, BITCH!

So option 1 has outcome of x% dead, y% poor. Option 2 has outcome of x% dead, y% rich. Clearly, option 2 is the better solution.

(Yes, I know many will opt for option 1 anyway, particularly the "spend time with family" part. These people don't work on Wall Street.)

Re:SELL!

[greenreaper]

And since it was after 2PM, it would have had to have dropped 20% (and closed the market, preventing the subsequent recovery).

Re:SELL!

[iaminthetrunk]

I work in finance, the hypothesis of the article is ludicrous. No one enters m or b in any system among dozens that I have ever seen. No one even enters all the 000s, as the layperson typically initially assumes. You enter 100 for a 100 million order. Virtually all the control reports for middle and back offices also output that way. And lets not even talk about most products/systems trading screens generally having dual static and the four-eyes principle and deal review of trades from done to verified states by the middle office (traders are front office) and so forth. The whole premise of the billion vs million typo is a pretty dubious posit from unfamiliarity. It doesn't defy the rules of physics, but just...unlikely...

The clearest fix, imho, is that most products / banks / trading house have modules for traders limits. Which do what you'd think - a trader simply cannot trade a billion, it auto-rejects. Not every system has this setup, primarily as the product vendor's often charge semi-ludicrous ad-hoc fees for every last module to their product, including the trading limits modules, but really, it's becoming more and more pervasively standard.

If you want to be concerned generally? Be concerned or activist about things like hedge funds over-leveraging under the current lack of regulation and counterparty/exposure visibility, where a political battle is long overdue to unfold to more transparently regulate hedge funds (via clearinghouses and regulatory disclosures, for instance). Or be worried that no one understands very well how to predict where the trillion dollar range massive amounts of overall global liquidity flow and behave under irrationality, overwhelming the tools at central bank's disposal in a way not seen in prior decades.

If you want to be concerned personally? Diversify your stock holdings outside the US market. Honestly, it's silly to hold your own country's stock too heavily. Probably illustrated best by people in small European countries having a portfolio made up of 80-90 percent of businesses based in their tiny country. Versus considering the world economy, and making your country perhaps weighted, but more accurately reflect it's percentage slice of the global economy.

This article is just silly headlines pandering. Though it beats the Slashdot article today on how many keys to carry in your pocket. Jesus. Non-judgment day must be growing near.

Actually

[copponex]

When you can make money hand over fist doing nothing, a very bad thing has happened: work has ceased to become a rewarded function. Instead, it's who you can screw over with dodgy investment strategies and exotic financial instruments that are not only worthless, but a liability. It's time that we end the casino markets and return to investing in things that are actually part of the economy that creates jobs - manufacturing, infrastructure, and technology.

Fund managers who literally do nothing but piss away money are making $1,000 an hour, and the people who educate our children are making less than $20 an hour. Something is seriously wrong with this picture.

Re:Actually

[grolaw]

That nails it. The synthetic instruments in trade now exceed the GNP of the entire planet. Smoke and mirrors - vast investments in products that have no intrinsic value - we are playing dice with the planet's economy.

Wall Street Steals the Best and the Brightest

[catchblue22]

Fund managers who literally do nothing but piss away money are making $1,000 an hour, and the people who educate our children are making less than $20 an hour. Something is seriously wrong with this picture.

Yes. And further, consider how Wall Street has attracted the best and the brightest of all of our people, math PhD's, engineers, those with an excellent ability to see the broad patterns in society. Our most brilliant citizens are pulled into Wall Street as "quants" or traders or corporate lawyers, and are often paid six and seven figure remuneration per year. And to do what? To game the system in favor of their wealthy masters at the expense of the middle classes. Do they create wealth, or are they merely helping to transfer it from the hands of the many to the hands of the few who can afford their services. Wall Street quants were supposed to make recessions a thing of the past. We all know how that turned out.

Meanwhile fields like science, engineering and medicine lose the most brilliant individuals. Citizens who would formerly have become professors, providing independent analysis of society's problems instead become selfish multimillionaires, who then retire at 40 to a life unproductive leisure. Think of what these brilliant people could have done if their abilities were harnessed in the right fields and with the right motivation. Think of the problems that could have been solved. Think of the knowledge that could have been gained. Think of the lives that could be saved by new medical discoveries. Think of the new technologies that could have been developed for the common good. Wall Street's co-opting of so many of the geniuses in our society will have profound consequences for our civilization. I can only hope that we can undo much of the damage been done by this corruption.

Re:What is the value of this market speculation?

[Dunbal]

I mean really? What do these traders produce? Nothing. But they earn money, quite big money solely on speculation. What is the purpose of this at all?

Liquidity.

You obviously have no idea what a stock market is. The buyers want to buy, and the sellers want to sell. The trader makes it easier for them. Forget stocks, look at something possibly easier for you to understand: you want to buy a house. You have money. But no one is willing to sell you a house. So what happens? You don't get a house. Conversely, you need to sell your house, but no one wants to buy one. So you have to wait 10 years. Get it?

Traders are middlemen, but they facilitate transactions. When they are right, and correctly estimate the direction of the market, they make a profit (call it a commission). When they're wrong, they make a loss. Traders aren't costing anyone anything - the buyer WANTED to buy and the seller WANTED to sell. No one is being forced.

You say that traders make "quite big money" on speculation. Yes. They also LOSE a lot of money on speculation. Today I lost $9,000. Are you happy now that you have a day job? Even if you work at McDonald's, you earned more than me - today. I'm not bothered, because eventually I will make that money back. However there is RISK involved. If you don't take risk, well, what do you expect? Minimum wage. If you take risk, you can make money. However you can and WILL lose money often.

But please don't go thinking that traders are the cause of all problems - they're not. It's banks that borrow money at 0% from the government and lend it out to you at 15%+ that are the problem. Enslaving people through debt is not something capitalism should be proud of. However corporations need to sell shares to raise the billions they need to make the products/services that benefit you and I. The only place they will get that money is from traders.

Re:Correct, but also incorrect

[religious freak]

What do you think "auditing the Fed" really means? The Fed's books are already open and reviewed by accountants regularly. In this context, "auditing the Fed" means putting the Fed under more control of politicians, which does NOT WORK... just ask Japan. Yes, the politicians would LOVE to get their hands on the money spouts.

I find that when people go off about the Fed, monetazation, etc they generally don't know jack about economics and ultimately start babbling about end of world scenarios, the government, blah, blah blah rather than economic facts.