What began as a glitch in pre-market trading turned into the NYSE's longest trading halt since Hurrican Sandy battered the East Coast. The ever-increasing complexity of US equity markets combined with an ever-decreasing pool of greater fools leaves windows open on down days (for it appears these 'glitches' only ever occur on down days) for markets to break. While NYSE traders defended the very market structure they have abhorred in the past as evidence that today was "not a failure," we can't help but find CNBC's Scott Wapner's amusing remark that "if retail investors want low cost liquid trading they are going to have learn to live with it" the perfect post-mortem for a rigged system brimming with confident insiders ever excited to take mom-and-pop's money.
As Bloomberg reported, "What began Wednesday morning with a seemingly workaday software glitch soon escalated into one of the most startling computer outages in Wall Street history -- and, for the Big Board, a race against the clock."
At the 9:30 a.m. opening bell, traders’ orders for some stocks weren’t reaching the proper destinations for processing. Techies were frantic to fix the problem. At about 9:32 a.m., they succeeded.
Two hours later, boom.
One floor trader started shouting, “My handheld’s down! My handheld’s not working!” He and other traders hurried over to a ramp on the trading floor where NYSE executives usually meet with them to explain any problems. Not today. Three hours later, still nothing. Everyone was just standing around.
“The order flow wasn’t being entered into the display books on the trading floor,” said Pete Costa, president of Empire Executions Inc. who’s worked at the exchange in downtown Manhattan for 34 years. “As soon as that happened, the exchange shut down to understand what was going on.”
Every computer screen “went this pukey, canary yellow color,” Costa said. “That means the stock has stopped trading.”
NYSE BREAK #1 Occurred shortly before the market open as the SNB-driven rebound from overnight weakness was beginning to fade...
Stocks rallied into the open while the NYSE was broken.
The issues were resolved shortly after the market opened... and stocks then plunged:
The tumbling stock market meant there was only one option:
NYSE BREAK #2 Occurred shortly before the European close...
And once again... stocks ripped higher and the world rejoiced that Greece and China didn't matter after all.
But then, once that problem was resolved, stocks plunged again, which left only one option for the PPT which learned its lesson from China where if there is selling, just halt the stocks being sold.
NYSE BREAK #3 - The Big One started shortly after the European close with stocks near the lows of the day...
CNBC went into full "turmoil" mode:
And this happened:
The NYSE CEO told CNBC that he "didn't know" if the early halts and glitches were related to the catastrophe that halted the entire exchange for almost 4 hours. Well as a help for him, here is a simple chart from Nanex that shows the last group of trades before the NYSE Blackout were in the same stocks they reported an issue with earlier in the day...
Simply put - they were related.
Why does the market break? Here's why: an ever increasing level of complexity in the market structure (as machines game each other to death)...
... Meets an ever-decreasing pool of greater fools:
But why 4 hours?
RUHLE: Why not roll over to your fail system, your backup?
FARLEY: We chose the least disruptive option for customers. So if we had moved to our Disaster Recovery Center, which was an option, customers would have had to do a good deal of work to be able connect to that new Disaster Recovery Center.
Contrast that with what we chose to do, which was root out the problem, put a plan in place to fix it, fix it, reopen the New York Stock Exchange, and there was no work for the customers to do to connect to the New York Stock Exchange.
So, to summarize, the NYSE has a disaster recovery center which... they choose not to use because it is an inconvenience to clients who would rather be unable to trade!
Maybe there was a different angle altogether: with China crashing and halting 70% of the market, the US had just one response:
China: We'll halt 70% of our stocks US: Oh yeah, we'll halt the world's largest stock exchange— zerohedge (@zerohedge) July 8, 2015
Here is the "official" reason according to the NYSE CEO:
RUHLE: And do you attribute this to a system upgrade?
FARLEY: I'm not 100 percent certain, because as I said, most of the day I spent with customers and staff. There was a configuration problem in our system. It likely had to do with an upgrade, but that is premature, and it's something that will come about as part of a full analysis of the situation.
Of course it's not the first time NYSE has been halted (as MotherJones reports)
It's not the first time a random event has interrupted the 223-year-old stock exchange. Most memorably, the NYSE closed following V-J Day, when troops returned at the end of World War II, and for three full days after the terrorist attacks of September 11, 2001. But the NYSE has closed for everything from the funerals of major world figures—such as Queen Victoria of England (1901), Rev. Martin Luther King, Jr. (1968), and Richard Nixon (1994)—to extreme heat (August 4, 1917).
Here is a brief history of events that halted trading at the New York Stock Exchange.
September 1873: The collapse of the Jay Cooke & Company, a major financial institution, caused the New York Stock Exchange's first closure, for 10 days, due to market calamity.
July 1914: The start of World War I in Europe shuttered the exchange for four months, the longest closure on record.
May 25, 1946: The NYSE shut down due to a railroad strike, part of one of the largest waves of strikes in US history.
1967 – 1996: Over this span of 29 years, eight ferocious blizzards either delayed the opening bell or closed the exchange early.
February 10, 1969: A snowstorm dubbed the "Lindsay Storm" shuttered the stock exchange for a day and a half amid 15.3 inches of snow.
July 21, 1969: This closure was planned, to celebrate the Apollo 11 moon landing.
July 14, 1977: The NYSE closed due to a major blackout across New York City.
October 27, 1997: A failsafe instantaneously stopped all trading for 30 minutes after the Dow Jones Industrial Average plunged 350 points.
May 6, 2010: The same circuit breaker that closed the NYSE in 1997 halted trading after a "flash crash" caused by automated high-frequency trading.
September 11, 2001: Terrorist attacks closed the exchange through September 14. The exchange also closed exactly a year later to mark the anniversary of the attacks.
October 29 – 30, 2012: The NYSE shut down while Hurricane Sandy battered the Eastern Seaboard. It was the first time a weather event closed the market for two full days in 124 years, after a snowstorm that dumped more than 40 feet of snow closed the exchange in 1888.
And won't be the last: as we wrote last year, the entire market is now like the infamous "social-network" stock CYNK that never existed: it too was pumped up to ridiculous valuations on no volume, not to mention no revenues, no profit and no employees ... and then when the selling began it was quietly halted.