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The Almighty Buck

Dow Jones Plunge Fueled by Overwhelmed Computers 215

Posted by CmdrTaco
from the sure-always-blame-the-it-guys dept.
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."
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Dow Jones Plunge Fueled by Overwhelmed Computers

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  • Blaming? (Score:4, Insightful)

    by VincenzoRomano (881055) on Wednesday February 28, 2007 @11:33AM (#18181500) Homepage Journal
    Computers never make errors.
    Humans do, at least in designing, manufacturing and sizing computer systems.
    This one seems to me like blaming at a knife once you cut your fingers.
    • Re:Blaming? (Score:5, Insightful)

      by pilgrim23 (716938) on Wednesday February 28, 2007 @11:38AM (#18181582)
      In the 1929 crash the problem was partially blamed on the ticker tape running at times up to 1 hour late. Before computers there were people you could blame.
      • Nonsense, that tape is clearly defective.
      • Re: (Score:2, Informative)

        by Anonymous Coward
        From Frederick Lewis Allen's Only Yesterday [virginia.edu], a fascinating history of the 1920s:

        Once more the ticker dropped ridiculously far behind, the lights in the brokers' offices and the banks burned till dawn, and the telegraph companies distributed thousands of margin calls and requests for more collateral to back up loans at the banks. Bankers, brokers, clerks, messengers were almost at end of their strength; for days and nights they had been driving themselves to keep pace with the most terrific volume of busine

    • by Nerdfest (867930)
      Perhaps a poor analogy ... this is more like cursing a knife when it won't cut through a tree fast enough.
    • by tha_mink (518151)

      Computers never make errors. Humans do, at least in designing, manufacturing and sizing computer systems. This one seems to me like blaming at a knife once you cut your fingers.
      Nobody is blaming the computers, the blame is being plopped on the computer "system", which at last I checked, is the hardware and software.
    • Re: (Score:3, Funny)

      by stevesliva (648202)

      Computers never make errors.
      Sure they do... just need to bombard them with alpha particles.
      • Bombarding a computer with alpha particles is a user error.

        You'd have to have an independently-evolved AI robot bombard the computer with alpha particles.
    • To super-duper, high energy alpha particle and gamma rays. Why do you think that ECC is so widespread? Not only for RAM - most processors these days have their caches ECC-ed as well.
    • Re: (Score:3, Insightful)

      by crabpeople (720852)

      "Computers never make errors."

      Sure they do. Bad ram, overheated components. If computers didnt make errors, you wouldn't need CRC checking - to name but one common error identifier.

      Lets try and think more, go for frosty pist less. Ok?

    • by timeOday (582209)

      Computers never make errors. Humans do, at least in designing, manufacturing and sizing computer systems.
      OK, but everybody knows that. Do you think the people behind the NYSE computers are getting off the hook by saying "it's not our fault, blame our computers!" I've never seen it work that way. When a system fails, the blame always falls on people.
    • Remember the Pentium divide by 0 bug?
      • by AaronW (33736)
        It wasn't divide by zero, but just plain floating-point division. After I learned of the bug I wrote a simple program to just brute force test division and it very quickly detected the problem. Certain values would cause errors. See http://en.wikipedia.org/wiki/Pentium_FDIV_bug [wikipedia.org] for some more information. As far as I know, there never was a problem with the division by zero logic.
  • by hxnwix (652290) on Wednesday February 28, 2007 @11:35AM (#18181522) Journal
    It looks like somebody forgot to change the gigantic SQL batteries embedded in the side of the NYSE building...
    • by Anonymous Coward on Wednesday February 28, 2007 @12:07PM (#18182004)
      as someone who has worked on the floor and systems at NYSE, I can assure you that none of the machines used for trading by specialists or brokers are windows machines, nor are the backends.

      all of the machines you see in pictures are dumb terminals connected to a number of master unix systems. they are configured for that special keyboard set used for deals and also touchscreen inputs. however, some (not all) can be booted into windows for personal use or to use firm-specific software.

      a side note -- the monitors used by NYSE (you can see them in the pictures on CNN) are ridiculous. huge size, almost perfect 180 degree visibility from side to side and top to bottom, touchscreen, and dust/fingerprint repellent. pretty nasty stuff.

      as far as the backends go, the standard system and the backup system are kept running in two locations -- on site, and in a backup location outside of manhattan (not to hard to figure out where, if you try). one can function without the other, on both counts. The QA done to ensure validity is INSANE. Nothing can even be brought out on to the floor without making sure it won't corrupt any of the systems (including the bluetooth system that has become the lifeline of the trading floor -- largest (in size and traffic) private bluetooth network in the world, when I was working the floor)
    • Re: (Score:2, Informative)

      by Anonymous Coward
      Actually, SQL Server 2005 is used by NASDAQ, not the NYSE - they are two completely different trading systems. The Dow Jones is an index of select stock listed on the NYSE.
      The machines that calculate the Dow Jones Industrial Average are IBM hardware running Unix.
      SQL Server running NASDAQ: http://www.windowsfs.com/eNews/tabid/112/articleTy pe/ArticleView/articleId/933/Securities-NASDAQ-Mig rates-to-SQL-Server-2005.aspx [windowsfs.com]
      IBM Unix Machines running NYSE and calculating the Dow Jones, as pointed out by ano
  • by erroneus (253617) on Wednesday February 28, 2007 @11:35AM (#18181532) Homepage
    It's a very strange and vague situation. I'm not sure we'll ever hear what actually happened. "Computer related" does tend to make one a bit frightened as to what that means exactly. It would be over-estimating the impact of stock-spam quite a bit, I should think even to consider whether or not that had any relation to the problems of yesterday. But if it did, perhaps we can now see some real action against spam... we can only hope.
    • by gunnk (463227) <[ude.cnu.gpf.liam] [ta] [knnug]> on Wednesday February 28, 2007 @11:53AM (#18181768) Homepage
      From what I read (NY Times, I believe) the system didn't really have a big an impact as some headlines would lead you to believe.

      Apparently the system that computes and displays the current Dow couldn't keep up with the systems that process the transactions when the number of transactions became very large. The display system caught up a bit later making it *appear* that the market at suddenly dropped something like 250 points in a few seconds.

      In reality, the decline was fast but steady. It was just the exchange's version of "Damn lag!"
      • by DrWho520 (655973) on Wednesday February 28, 2007 @12:07PM (#18182000) Journal
        Change in Chineese trading market regulations were the cause of this drop. A massive sell off occurred with the beginning of a crackdown on questionable and illegal trading on China's stock market. This rippled to every other market in the world. Asian, North America, South American and European markets were all affected. Blaming the computer systems is damage control.
        • by Knara (9377)
          Can you post more info / links about this?
        • by DerekLyons (302214) <`fairwater' `at' `gmail.com'> on Wednesday February 28, 2007 @02:50PM (#18184266) Homepage

          Change in Chineese trading market regulations were the cause of this drop. A massive sell off occurred with the beginning of a crackdown on questionable and illegal trading on China's stock market. This rippled to every other market in the world. Asian, North America, South American and European markets were all affected. Blaming the computer systems is damage control.

          if you actually bother to read TFA - you'll find they don't blame the computers for the drop. They blame the computers for creating the perception of a cliff rather than a steep slope.
           
          This is actually something fairly important to consider as more and more of our life interfaces with displays mediated by computer. (Even down to the mundane. I've discovered the digital controls in my oven seem to use a time weighted average - which works fine in convection mode, but it enlarges the deadband in normal mode.)
    • Re: (Score:2, Informative)

      by LGV (68807)
      All of the stock spam I get is for companies that don't trade on the NYSE or NASDAQ, it's for much, much, much smaller companies that trade on other exchanges. The companies that make up the Dow Jones average (30 of them) are way too heavily traded to be swayed by pump and dump spam, so they don't bother.

    • by Jonny do good (1002498) on Wednesday February 28, 2007 @12:23PM (#18182214) Journal
      The drop was really fueled by a number of causes. China's 9% decline the night before was the primary trigger. Sub-prime loans have been leading to trouble for a number of firms lately with the housing decline fueling those problems. The market has been in bull form for quite some time with no corrections leading to a large number of stock prices not supported by their fundamentals. The durable goods sales reports are expected to show under 3% growth when it has been up in the 4% range and this always spooks investors. Any economic indicators showing any sign of change spark massive changes on the market.

      The computer problems experienced were really just a lag between the DJIA being calculated and the massive volume of trades being made. Individual stock prices were being reported correctly but the index wasn't keeping up. When the computers caught up they did it over a single minute dropping about 300 points while in reality by the time the index caught up the market had started to rebound a bit. All of the value stock buyers saw the deals becoming available when the landslide hit and started buying a bit. Kind of like today, the market is rebounding because many are looking at stocks that were overpriced yesterday and thinking they are cheap. It's not really as big of deal as the press makes it out to seem. It's not like the '87 crash where 500 points was like 20% of the market. 500 points off th dow is under 4%.

      Another trigger for the sudden decline could have been the headline on The Drudge Report (linking to the New York Times article by the same headline) stated that Greespan predicted an imminent recession when his words were as they always have been and that people should be carefull because the economy has been growing for longer than the average growth cycle by about 12 months. Greenspan didn't say anything about a recession being imminent.
  • by tomstdenis (446163) <tomstdenis@@@gmail...com> on Wednesday February 28, 2007 @11:37AM (#18181574) Homepage
    I spend a lot more than I save :-)

    The Dow may go down, but a pizza is still as tasty hehehehe.

    I wonder how much of this load is due to low volume day trader movement?

    Tom
    • I wonder how much of this load is due to low volume day trader movement?

      I would guess, virtually none, since they're by definition low-volume?

      This blaming it on computers seems mostly a red herring. The markets in Asia (particularly Shanghai) tanked, and as a result, the markets in the US tanked, because companies in the US are heavily invested in China.

      I think the only lesson here, in case there was anyone left who didn't get it, is that we all float or sink together. For better or worse, the US has tied i
      • low volume means how much stock you are moving.

        Do you really think the traffic is higher if you move more units of stock? What I meant is there are probably millions upon millions of people moving $200 worth of stock here and there. Versus the tens of thousands moving significant quantities.

        Tom
        • by Kadin2048 (468275) <slashdot.kadin@xoxFREEBSDy.net minus bsd> on Wednesday February 28, 2007 @12:03PM (#18181926) Homepage Journal
          Yes, but what I'm questioning is whether the Dow Jones' computers really had anything to do with this whole market movement at all. At most, all they did was slow down, so that the DJI lagged behind the real world for a while, and then suddenly caught up when their backup system went on-line and took over.

          I think that it's more of a symptom and less of a cause. The cause of the market movement was in Asia; that made people sell, people selling caused the DJIs computers to suck. Now, perhaps the DJIs computer slowdown, and consequent large jump when they fixed the problem and got the backup running, caused more people to sell, but this seems specious. The slump was already in progress by the time that the computer slowdown occurred, because the slowdown was driven by high trade volume.

          So my point is mostly that I don't see how it matters, really. People are looking towards computer glitches as the cause for the 3% drop in the market (or whatever it was), and that's just not true. The computer glitch might have made the drop look worse, or more precipitous, than it actually was at one point during the day, but it didn't cause or really drive it in any significant way. Even if the DJI folks' computers had worked perfectly, the market would still be sucking. In fact, computerization and the consequent flow of information is what links markets; it's only in the last few decades that the Asian and US markets have felt each other's pain so closely, so in a way, you can blame the computers for working too well in general, when you get these domino-effect deflations.
          • by illumin8 (148082)

            Now, perhaps the DJIs computer slowdown, and consequent large jump when they fixed the problem and got the backup running, caused more people to sell, but this seems specious.

            No, what really happens is that a lot of the big money has automated trading systems. These automated trading systems look for key criteria like quick movements in stock and buy or sell to make money (or avoid losses) on the trend. When a big movement happens in a short period of time, it creates a feedback loop where big movement ca

            • Re: (Score:3, Insightful)

              by Lawrence_Bird (67278)
              er.. not in this case. Their 'explanation' is that they had fallen behind, which in fact was the case as when DJIA was "down" 295, futures were already down 400 and sinking. In fact, I commented to another trader what a nice arb was out there if only one could short on the downtick in the cash market. Note also that there were already some limitations in effect on automated program trading (tick rules)

              In the event of a 180-POINT DECLINE in the NYA, all index-arbitrage sell orders of the S&P 500 stoc

    • by Mateo_LeFou (859634) on Wednesday February 28, 2007 @11:47AM (#18181690) Homepage
      yesterday's news was annoying as hell. Everyone and their dog chimed in on what caused this horrible crash, what investors should do now, how bad it might get, etc. People: the market's been soaring for months. This is a perfect example of broadcasters' attempt to get you afraid and addicted to "news".
      • What you say? They done lie to us to drum up bidnez?

        You know this, I know this, some others may know this, but the problem is people let themselves get caught up in it. Very few people really give a damn about gay rights [for example, one way or another] but they'll sure as damned have an opinion about it [usually supplied by the media or some ass on the medium],

        People know the news is fake, at some level, they just *need* to believe it. So long as the bad guy is someone I don't understand, and all those
    • by Erwos (553607)
      You joke, but in high inflation economies, this is not uncommon.

      I'd also point out that a one-day blip, even a big one, doesn't really mean very much. "Savers" win and lose in the stock market by long-term trends, not the short-term.
      • by bberens (965711)
        Maybe, but my portfolio just took a dump on the order of about 4% of total value yesterday. It will likely take several months to get back that single day's loss. If I were near retirement and had $1 million in there I'd be pretty upset at losing $40k in a day (almost a year's worth of retirement money). This of course ignores the fact that at or near retirement my money would all be in bonds for the most part and I'd be fairly impervious to these spikes...
  • See... (Score:5, Funny)

    by ZonkerWilliam (953437) * on Wednesday February 28, 2007 @11:39AM (#18181598) Journal
    This is what happens when I sell one lousy share of google!
  • by pzs (857406) on Wednesday February 28, 2007 @11:41AM (#18181618)
    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
    • Re: (Score:2, Funny)

      by Nykon (304003)
      A butterfly flaps it's wings in Asia , and the dow drop 400 points in the US... brilliant.

      Your Nobel Prize is in the mail. Don't call us. We'll cal you.
      • Re: (Score:3, Funny)

        by pzs (857406)
        > A butterfly flaps it's wings in Asia , and the dow drop 400 points in the US... brilliant.

        Of course, the usual moron response to this is to say "why don't we just kill all the butterflies in Asia?"

        Peter
      • by FirstOne (193462)

        "A butterfly flaps it's wings in Asia , and the dow drop 400 points in the US... brilliant."

        More likely a disk drive started to fail, but was able to recover. They can do upward of several hundred retries over 5 to 10 seconds before they return a fatal error.

        If the disk drive completes the operation after just a couple of dozen retries, they'll keep on going without reporting an error. If no error is reported back to the controller the raid functionality usually won't kick in (depends on the

    • by Lord Ender (156273) on Wednesday February 28, 2007 @12:03PM (#18181934) Homepage
      If an index has been trading near a certain level for a while, then a "panic" event causes a huge drop without changing the fundamental underpinnings of the market, traders view this as a HUGE signal to BUY BUY BUY, on margin if possible. In a few weeks, the index is back where it started before the panic event.

      At least, that has been my observation. I can't WAIT for leveraged index ETFs... come on, ProFunds!!

      Oh, and your Grandpa's pension would not go bankrupt over a panic event. That's absurd.

      Of course, anyone who relies on pension companies for retirement has bigger problems...
      • by vertinox (846076)
        Oh, and your Grandpa's pension would not go bankrupt over a panic event. That's absurd.

        I can't help but think the same thing was said during 1929 and then again in 1989.
        • Banks don't invest 90% of their customers' savings in the stock market these days. Banks also carry insurance. So 1929 doesn't apply.

          I wasn't trading in 1989, but I don't remember stepping over starving retirees on my way to school. I think kids these days know that they should keep most of it in index funds when they are young, then move it to government bonds when they are reaching retirement. To rely on a single company that relies on the stock market /while in retirement/ seems nuts to me.
    • 8. . . .

      9. Profit!

    • by stefanlasiewski (63134) <slashdot AT stefanco DOT com> on Wednesday February 28, 2007 @12:11PM (#18182064) Homepage Journal
      0. Diversify your holdings, especially your retirement accounts, to protect against market fluctuations. The stock markets will always go up and down for a thousand different reasons-- computer glitch, bad news, hummingbirds, whatever.


      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%


      5a. If your investments are diversified, you will survive when the Indexes drop 10%. This is especially true for long-term investments.
      6. Buy low.
      7. Wait for a while.
      8. Sell high.
      9. Profit!
      10. Enjoy your retirement.
  • by jhfry (829244) on Wednesday February 28, 2007 @11:41AM (#18181620)
    Considering the amount of, and importance of, data that flows through that system... I am surprised that it's not routinely well ahead of the needs at peak capacity.

    I'd say that someone, likely the one in charge of the IT budget approval, keeps tight purse strings. Of course, he's not the one getting reamed, it's the CIO and his crew who are taking the blame even though they have repeatedly requested the funds to improve the system. Just speculation, but likely spot on.

    Just another piece of ammo when I start a new job and demand a reasonable budget.
    • Imagine how easily this could have been avoided had they funneled just half of the board's compensation into IT expenditures.
    • Yeah, but where are they going to get money to put into their budget? I mean, it's not like they can just funnel money into whatever accounts they want... : p
    • Considering the amount of, and importance of, data that flows through that system... I am surprised that it's not routinely well ahead of the needs at peak capacity.

      The NYSE has historically been behind the curve as far as capacity to trade is concerned. I don't have links to back it up, but i recall a TV program that detailed how, before electronic trading was introduced, the exchange had to be closed during the week to allow transaction processing to catch up with the previous week's trading.
    • Re: (Score:2, Informative)

      by chad.koehler (859648)
      Data rates have doubled at the exchanges in the recent past, and they are likely to double again the the near future. Keeping ahead of this curve is not as easy as one might think...

      Just one stock for instance, APPL will have millions of transactions in a single days trading... Including just trades and quotes you can see close to 100Mb of activity for a single symbol in a day.

      We are constantly trying to increase capacity, but we're near a point where the only meaningful upgrades for capacity plannin
    • Considering the amount of, and importance of, data that flows through that system... I am surprised that it's not routinely well ahead of the needs at peak capacity.

      Generally it *is* ahead of things at peak capacity - but there was a massive spike yesterday that briefly exceeded peak capacity.

      One of the problems Wall Street has been dealing with for decades is a tail chase with itself - every time they up their computer capacity, trading volume expands to consume the capacity. What was shortly bef

  • Dow Jones & Co., the media company that manages the well-known index of 30 blue chip stocks, said it discovered shortly before 2 p.m. that its computers weren't properly handling the day's huge volume in trades at the New York Stock Exchange.

    It switched to a backup computer, and the result was a massive swoon in the index as the secondary system took over processing shortly before 3 p.m.


    Highly Reliable Indeed !!!!
  • Sure, blame the computers. After all, it's not like the market system has shown any penchant for random and pseudo-random ups and downs ranging from negligible to ultraviolence since long before before any figures were computed by machines rather than pencils.

    wonder what the reactions would have been like if a "computer glitch" knocked the thing up 500 points instead of down.
  • Fueled nothing (Score:4, Informative)

    by AlphaNuRho (1069628) on Wednesday February 28, 2007 @11:42AM (#18181630)
    I don't see how you could say that the computer problem fueled the plunge. My understanding of the events is that the only problem was with the system that calculated the Dow Jones Industrial Average Index (the number that is around 12,200). There wasn't a backup or delay in execution of trades or anything like that. The decline was real, but it was spread out over an hour instead of the 2 minutes reflected by the DJIA.

    Traders still bought and sold stocks at their real value in real time. The calculation of the sum of their activity was the only thing delayed.
    • Actually, if you look at the chart, as soon as the computers caught up and showed how low the market had gone, folks started buying.

      They were selling based on the false impression that the market was not down enough yet.
      • by nelsonal (549144)
        Most of the folks with any real money (the ones who can move markets when they start buying) are calcing the S&P themselves, because it's faster than waiting for the index to update. My first internship was writing stuff that did that, it was cool to see the S&P a few 10ths faster than it was on the television. Almost no one in the investment world looks at the DJIA except for sentimental value. It's a terrible index but really easy to calculate (compared to other more complex and useful indicies
    • From the article:

      "Some of the books froze up," he said, referring to the systems in which traders place their orders. "You couldn't really trade. You couldn't really make sales." He said orders appeared to become backed up. "Once they unfroze the Dow fell."

      It sounds like at least some of the trade processing systems rely on the DJIA calculator in some way. Perhaps they query it to report the DJIA at the time of the transaction or some such. So trades were being processed but the feedback mechanism was fro
  • not quite (Score:5, Informative)

    by flynt (248848) on Wednesday February 28, 2007 @11:42AM (#18181638)
    The computer systems weren't responsible for the overall drop, but rather the rate of the drop during the few minutes of switching over to the backup computers. This queued up trades, and at the current volume of the switchover, caused a large drop when they caught up. At least that's how I understand it.
    • It's voodoo (Score:5, Insightful)

      by PIPBoy3000 (619296) on Wednesday February 28, 2007 @12:19PM (#18182174)
      Yep - that sounds just about right.

      Imagine a series of database transactions, with each step getting queued up and waiting for the system to finish processing it. The actual DOW number reflects fully completed transactions, but not pending transactions that might impact the outcome. This is probably a good thing, as a transaction might end up being rejected, so you only want to show the outcome of completed transactions. Once the backup system came online, the transactions quickly finished being completed, resulting in the dramatic drop.

      The amazing thing to me is that the system is robust enough that transactions can survive the loss of their main computer system and bringing up a secondary one. That's database, networking, and coding voodoo, all wrapped into something pretty awe-inspiring.
      • by Aceticon (140883)

        The amazing thing to me is that the system is robust enough that transactions can survive the loss of their main computer system and bringing up a secondary one. That's database, networking, and coding voodoo, all wrapped into something pretty awe-inspiring.

        Pretty much the number one consideration when designing a technical architecture for a mission critical is to guarantee that no transaction is lost.

        Such an architecture is not too hard to design.

        The really hard part is to make one that can process millio

        • by C_Kode (102755)
          Pretty much the number one consideration when designing a technical architecture for a mission critical is to guarantee that no transaction is lost.


          With todays databases like Oracle losing a translation just doesn't happen. (for the most part anyhow) What is cool is to have a fail-over that keeps in sync with the production DB, will fail-over, run the logs, and come online in mere minutes with a system this size and with this load. No matter what, it's impressive even if it's effect was visible to the use
  • Real Cause? (Score:3, Insightful)

    by green453 (889049) on Wednesday February 28, 2007 @11:44AM (#18181658)
    I'm all for looking at things from the tech/computer geek side of things as much as anybody on Slashdot, but isn't the summary taking things a bit far? It was mentioned that there may have been other causes that combined with computer glitches, but wouldn't the fact that markets in China dropped a whopping 9% yesterday seem to be the real cause? I'm sure swithcing computer systems may have scared a few people, but I doubt it was the primary cause of a 400pt drop. That said, it is interesting to think about the effect of computer systems on the financial markets. I've always maintained that it isn't the politicians or the business owners or the economists that run the world, it's the engineers. Think about what would happen if there was a complete shutdown of the systems that run the markets. See if all the Wall Street profiteers pay their geeks a pittance of their "annual bonus" then...
    • by TubeSteak (669689)
      My hypothesis is that the lag in the system took the perfect out of "perfect information".

      It might seem somewhat simplistic, but since 'the market' didn't know it was in free fall, 'the market' couldn't correct.

      The lack of information kept people from buying while stocks were steadily slumping, China or not.
  • by G4from128k (686170) on Wednesday February 28, 2007 @11:46AM (#18181674)
    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.
    • by richg74 (650636) on Wednesday February 28, 2007 @12:44PM (#18182480) Homepage
      From what I've read, and learned from talking to a couple of former colleagues (I worked in IT on Wall Street for 20+ years), your note is almost but not quite right. You correctly point out that the Dow's decline was, for a time, seriously out of line with the decline in other market indices, such as the S&P 500. However, you went on to say:

      It was clear that the NYSE's computers were woefully behind on reporting a much more orderly and steady drop.
      In fact, the problem appears to have been that the systems at Dow-Jones -- which owns the DJIA index and calculates it -- could not keep up with the volume. When the backup system came online, the reported index showed a significant drop in a very short time. In actuality, the decline was real, but it had already happened over a longer period of time. As it says in the original article:

      "The market's extraordinary trading volume caused a delay in the Dow Jones data systems," said Dow Jones spokeswoman Sybille Reitz. "We decided to switch over to the backup system, and the result was a rapid catch-up in the published value of the Dow Jones industrial average."
      There's no indication that there was a problem with trade reporting by the NYSE, which would be a much more serious problem. But the data feed from the exchange reports prices trade-by-trade as they occur. So, if an external system like Dow-Jones's gets behind, it usually has to plow through the update stream to get current, which can result in a sort of "compressed time" effect.
    • by rcamera (517595)
      all right except one point - the nyse didn't have a problem during that time. dow jones had the problem (they are a seperate company). if nyse had a problem reporting trades, then the s&p would have shown the same problem. i like to pick on nyse as much as the next guy (you should see some of our slippage numbers...), but this time it was not their fault. why is everyone under the impression that they are?
      • by C_Kode (102755)
        why is everyone under the impression that they are?

        Because a lot of people don't know the difference.
  • There may have been a computer error that made things look interesting, the real culprit was China's bad day at the stock market. It created a World stock slump [bbc.co.uk] which drove down stock markets all over the globe. So for those of you who don't RTFA, there wasn't anything nefarious going on.
  • by dougman (908) on Wednesday February 28, 2007 @11:53AM (#18181766)
    The DOW is up today. Can't you at least get the most basic facts right? The drop was yesterday.
  • by maroberts (15852) on Wednesday February 28, 2007 @11:55AM (#18181792) Homepage Journal
    As well as crashing planes into buildings, it seems "Debt of Honor" is getting good at being an oracle of modern times.
  • by xxxJonBoyxxx (565205) on Wednesday February 28, 2007 @12:04PM (#18181946)
    If I'm reading this right, an IBM back-end system (mainframe) with lots of IBM-delivered Linux workstations were in the mix here. Anyone know for sure (i.e. work there)?

    http://www.internetnews.com/bus-news/article.php/3 447741 [internetnews.com]
  • The Chinese market took a bit of a nosedive (around 9%) after (1) profit-taking from a record-high the day before when their market reached a psychologically nice place, and (2) the rumor that they were going to start charging capital-gains tax, which we go here. China's place in the world market is important enough that that triggered a worldwide economic hiccup that wiped out most of this year's economic gains worldwide.

    Other contributors were low durable goods orders and Greenspan's warning on monday of
  • Trying to access my account at Fidelity is also slow and with intermittent failures today and yesterday.

    The "snowballing" is not in the prices moving too much up or down, but simply in the increased activity as a lot of people are trying to check their accounts and trade in and out of positions...

  • What system? (Score:2, Redundant)

    by UnknowingFool (672806)
    It was never mentioned which system crashed. I guess the NYSE doesn't want to embarass the company. I wonder if it was their Windows 2003 with SQL Server system.
  • Hal? HAL!!! (Score:4, Funny)

    by Malakusen (961638) on Wednesday February 28, 2007 @12:43PM (#18182462) Journal
    Let me put it this way, Mr Amer. The 9000 series is the most reliable computer ever made. No 9000 computer has ever made a mistake or distorted information. We are all, by any practical definition of the words, foolproof and incapable of error.
  • Darn WGA and Automatic Updates bit us again! ;)

    PGA
  • by Cervantes (612861) on Wednesday February 28, 2007 @03:16PM (#18184608) Journal
    Dr. Zoidberg: Once again, the conservative, sandwich-heavy portfolio pays off for the hungry investor!
  • by rrohbeck (944847) on Wednesday February 28, 2007 @03:29PM (#18184724)
    http://money.cnn.com/2007/02/28/markets/tech_glitc h/index.htm [cnn.com]

    The publisher of the Dow industrials said that a system problem starting at 1:50 p.m. ET on Tuesday, amid unusually heavy trading volume, caused a 70-minute lag during which the value of the market measure lagged the declines in the underlying stocks.

    The subsequent downward spike in the Dow occurred when the problem was corrected as the company switched to its backup system at around 3 p.m.

    Just before the switch, the Dow was showing about a 160-point drop. But then the blue-chip barometer appeared to tumble some 200 points in the blink of an eye as the newly available data was correctly reflected in the average.
  • ... to blame it on the computers is even more human.

When you don't know what to do, walk fast and look worried.

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