Speculations around Dow 1000 intraday crash!

There are lots of speculations surfacing around what caused Dow 1000 point intraday loss.


A computerized selloff possibly caused by a simple typographical error triggered one of the most turbulent days in Wall Street history Thursday and sent the Dow Jones industrials to a loss of almost 1,000 points, nearly a tenth of their value, in less than half an hour. It was the biggest drop ever during a trading day.

No one was sure what happened, other than automated orders were activated by erroneous trades. May be a Fat Fingered Trader! Duh!! One possibilility being investigated was that a trader accidentally placed an order to sell $16 billion, instead of $16 million, worth of futures, and that was enough to trigger sell orders across the market.

The Dow recovered two-thirds of the loss before the closing bell, but that was still the biggest point loss since February of last year. The lightning-fast plummet temporarily knocked normally stable stocks such as Procter & Gamble to a tiny fraction of their former value and sent chills down investors' spines.

No one was taking blame, either. The New York Stock Exchange said there was no problem with the Big Board's systems, and all the markets were on a conference call with the Securities and Exchange Commission.

Nasdaq issued a statement two hours after the market closed saying it was canceling trades that were executed between 2:40 p.m. and 3 p.m. that it called clearly erroneous. It did not, however, mention a cause of the plunge.

The NYSE also said it would cancel some trades on its electronic platform.

The SEC issued a statement saying regulators are reviewing what happened and "working with the exchanges to take appropriate steps to protect investors."

Whatever started the selloff, automated computer trading intensified the losses. The selling only led to more selling as prices plummeted and traders tried to limit their losses.

During researching on story I learned about GPGPUs allowing sophisticated financial analytics programs. Which sophisticated traders write computerized algorithms to trade on live data making split second decisions. Here is a link to site explaining GPGPUs:

Other speculations surfaced were around Greece situation getting worse, Dollar loosing ground to Yen. One noticeable move was in bond markets TLT (iShares Lehman 20+ Year Treas.Bond ETF) crossing $100, where intraday 10 year bond yields fell to 3.25% before recovering.

It was a massive goof up today and SEC must get answers fast!