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Israel Flash Crash: TASE

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What the Falafel? There are times when you wish you could just dig a big hole and throw yourself into it and let someone else fill it in with shovel-loads of muck. We can cut the bull about picking yourself up and dusting yourself down and all of that baloney, with the intense need to persevere in life and come out tops. There are times when the first solution is the only reasonable choice. That’s how the clerk in Tel Aviv, Israel must be feeling right now after causing the Tel Aviv Stock Exchange (TASE) to record a loss for one of the largest investment companies in the country. The loss was equal to nearly 100% of its market value on Sunday. The Tel Aviv 25 also dropped by 2.5% infive minutes.

At 12.20 pm a mini crash took place on the TASE. Shares were traded for a five-minute period before being interrupted. The TASE said that all transactions were null and void for that period (as required by its rules and regulations). Operations resumed afterwards as normal. However, it brings into question the need for tighter controls and a warning system to stop this sort of occurrence. But, the TASE has said that no new system would be implemented at the present time. The spokeswoman for the TASE stated that it was nothing unusual and this sort of thing happened every couple of months, which is perhaps even more reason to get a system in place that would prevent fat fingers from mistyping on the keyboards. If the error at the TASE can cause a company to lose almost 100% in just a few minutes and that happens every couple of months, then something is amiss. Retracting on sales that have gone through is also much harder as a result. Each investor or agent must be contacted individually in order to inform them that the sale has been cancelled. The TASE is said to be working still to rectify this getting in touch with every single person. The clerk ended up not throwing himself into a bottomless pit, but got a fine worth 10, 000 Israeli Shekels ($2, 777).

Investors tried to dump shares as the market fell by 99.9% for the investment firm. Not bad for a simple typo that ends up triggering short sales in quick succession. According to the spokeswoman for the TASE, it was first thought that there had been a major catastrophe somewhere in the country. When they heard nothing that was being announced in the media, they investigated further. It was one particular sale order that was the cause of the problem. The agent had originally intended to enter the name of another company in one of the fields (a much lower-priced company than the one he entered). The low value of the shares of the company that was entered by mistake set off electronic selling en masse. It was Israel Group that had its name entered incorrectly and dropped from a share value of 167, 200 Israeli Shekels ($46, 385) to just 210 Israeli Shekels ($58). Today that company was still down by 0.54% to 166, 300 Israeli Shekels (-900). Israel Corp is the largest holding company in the country (specialized in chemicals and fertilizers).

The TASE typing error comes just after the NASDAQ experienced a technical glitch leading to a halt in trading fourdays ago. Trading was interrupted for a four-hour period as the NASDAQ suffered problems with a system that was disseminating price quotes. All trading for the 3, 000 shares on the NASDAQ was interrupted. Although, according to an official statement the glitch only lasted thirty minutes, but took much longer to make sure that trading could resume correctly. Trading opened thirty minutes before the closing bell and the NASDAQ closed 1% up at 3, 638.71.

The whoe problem stems from the fact that we have created complex systems that are so inter-connected that one problem in this system leads to a problem in another system and things go haywire. We have no real means of dealing adequately with the problems that are created and technology needs to have an in-built possibility of still functioning correctly without interruption, even when there is an error that occurs. Problems should be dealt with within seconds or minutes, rather than having outages that last for hours. The systems are too fragile today and they have nowhere neat the type of resilience that the market requires today.

The TASE needs to think about revamping the security system instead of complacently accepting the fact that it happens every couple of months.

faulting on payments or not having enough money will tarnish the US, but who do they have to blame? 

Originally posted: Israel Flash Crach: TASE

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