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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."
CBC Story about software controls for selling on the market: http://www.cbc.ca/money/story/2010/05/06/tsx-markets.html
Nuts to fat finger keyboards, there are automated software controls in the industry that caught-on to the sale and snowballed this individual's mistake into something really big. The issue wasn't just in this guy's mistake, but the fact that potentially billions of dollars changed hands because of a trust relationship these systems have with market indicators.
Not that there's anything wrong with that: on a good day this could protect big firms from being the guy caught holding the bill, but I think we've discovered where the next upgrade in broker software might be :)
-Matt
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So you implement some protection. Then some prima donna trader comes by and asks that they be disabled and his trades unquestioned. If the company makes good profit off the guy, down the protection goes.
Reminds me of this story on a commodities trader that not only didn't close his position, but actually ended up taking physical delivery of the commodity. Oops. Sure there were protections, but the guy had them disabled.
http://thedailywtf.com/articles/special-delivery.aspx
Hell, for all we know, this is exactly what happened - most traders can't enter in a "b", except a succint few well-trusted individuals. Just one of the "gods" managed to fumble it.
It may have been a system problem, that's quite possible. But institutional traders don't type in "b" or "m" next to some number they type in of stock they want.
But even in some strange world where they did, entering in a standard lot quantity that required an "m" (much less a "b") for the stock that is suspected to be the issue at hand (PG), would result in an order that exceeded the 30-day avg vol for PG by a factor of 10.
And that's not even considering that the firm's risk management would, in theory, have caught the issue already.
I am, obviously, doubtful of this explanation.
They've been saying for some time the market was due for a correction. Mind you, at the height of the financial meltdown, the Dow was at 6500, and has almost doubled value in about a year, it was rising too fast considering that the recovery still really hasn't come (i.e., there are still no jobs).
The only people making money are the same ones that are always making money -- the fat cats. Now it looks like the market will correct, and probably stablize around 10k, maybe 9. And even more people will lose their jobs and the cycle will continue until America admits that it is bankrupt.
Then will come some really hard times, but, once we address the real issues plauging the country, we'll come out of it stronger. But first, we need to start getting rid of all the lawyers....
If telephones are outlawed, then only outlaws will have telephones.
It doesnt take a genius to figure out that the "typo" theory is BS... In 2008, it was a "computer fault"... Deflation is still very much in control at the moment, and it appears that we have only delayed it. As greece and many other sovereigns start to default on their debts, we will see the leg down... Acceptance is a b&^%*& sometimes...
It reminds me a little of a throwaway comment Stephen Hawking made in the recent series Into The Universe With Stephen Hawking - he was asked not to speculate on the end of the universe in a certain lecture series for fear that it would affect the stock market. Really? Even if the universe was going to end in our lifetime, and no-one had noticed before now (oops), what kind of fool would hear the news and immediately worry about his or her stock portfolio? What are you going to do with your money after the universe ends? You would think (if people behaved rationally) that the stock market would grind to a halt when every trader says "Screw this, I haven't got much time left and I'm not going to waste it here".
Commodore64_love: I don't comprehend people who're so frightened of death that they'll bankrupt themselves to stay alive
You read that headline right. This should happen ALL THE TIME. It would be good for the markets.
Speculators would be driven out, or driven insane. Emotionally driven traders would have heart attacks.
Sound judgments made based on factual data would not be affected.
Next week, people like me won't give a toot that this ever happened. However, a lot of day traders just pooped their pants. I'm buying men's underwear stocks.
The person who made the mistake will be punished dearly.
What's being talked about here isn't the general decline in the market today, but a very suspicious "blip" that occurred in a huge number of stock prices at 2:45 EST, followed by immediate recovery.
Look at the blip:
Adobe
Google
Westlake Chemical
Cabela's Incorporated
Apple
Microsoft
Titanium Metals
Fidelity IIS
This shit is across the board, with very few exceptions. You try explaining how something like that happens apart from some major fuckup somewhere.
If you're worried about that kind of collapse, then yes, gold would go to zero, too. What can you do with gold other than look at it? You think you're going to arrange a deal with the typical large industries that actually put gold to a useful purpose? After a massive currency collapse? Good luck!
Baskets of metals are ok as a hedge, though all bets are off in a real crisis, and there is so much more out there you could be involved in that doesn't involve getting ripped off by a sketchy company with cheesy ads.
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