Electronic Trading to Blame for Plunge, NYSE Says

[girl gone mad]

So why should any of these trades be reversed? The computers were doing exactly what they were programmed to do.

From http://www.businessweek.com/news/2010-05-06/electronic-trading-to-blame-for-plunge-nyse-says-update1-.html">Business Week:

May 6 (Bloomberg) -- Computerized trades sent to electronic networks turned an orderly stock market decline into a rout today, according to Larry Leibowitz, the chief operating officer of NYSE Euronext.

While the first half of the Dow Jones Industrial Average’s 998.5-point plunge probably reflected normal trading, the selloff snowballed because of orders sent to venues with no investors willing to match them, Leibowitz said in an interview on Bloomberg Television.

“If you look at the charts you can see fairly clearly where the trades came in,” he said from New York. “It’s that V-shaped drop where it came down and snapped right back up. You had some very high-cap stocks trading down 50 percent or large percentages in a split instant because there really was no liquidity in electronic markets.”

The selloff briefly erased more than $1 trillion in market value as the Dow average tumbled 9.2 percent, its biggest intraday percentage loss since 1987, before paring the drop.

More than 29.4 billion shares changed hands on all U.S. venues today, including traditional exchanges such as the NYSE, rivals Bats Global Markets Inc. in Kansas City and Jersey City, New Jersey-based Direct Edge, and other electronic platforms. The level compares with 2.58 billion traded on the NYSE, making it the biggest gap in more than three years, data compiled by Bloomberg show.


Increasing automation and competition have reduced the Big Board and Nasdaq’s volume in securities they list from as much as 80 percent in the last decade. Now, two-thirds of trading in their companies takes place off their networks because orders are dispersed across dozens of competing venues.

[bemildred]

1. Same old same old. nt