Computerworld - The U.S. House of Representatives Financial Services Subcommittee on Capital Markets failed to pinpoint any single cause for last week's stock market plummet that sent the Dow Jones Industrial Index plunging almost 1,000 points in a half hour.
The committee held a hearing on Tuesday, during which members questioned the heads of the U.S. Securities and Exchange Commission, New York Stock Exchange and Nasdaq in an attempt to gain some insight on what caused the precipitous drop.
The Dow fell to 9,872 points in a half hour last Thursday. As quickly as the market dropped, it suddenly and dramatically reversed itself, recovering 543 points in approximately a minute and a half, to 10,415.65, and ended the day down 347.80 points from the previous day's close.
SEC Chairman Mary Schapiro told the committee she was "committed to finding effective solutions in the very near term," and also said an existing agreement with major exchanges was in the process of strengthening trading restraints with regards to big market fluctuations.
"The events of last week are unacceptable. The SEC is engaging in a comprehensive review and will take necessary steps to implement additional safeguards to prevent the type of unusual trading activity that occurred briefly last week," she told the committee.
Committee Chairman Paul Kanjorski (D-Penn.) said that after hearing the testimony from the SEC, he felt "a lot more secure."
Not everyone on the committee echoed that sentiment. Schapiro said the market had already declined 161 points, by 2:00 p.m. over the financial meltdown in Greece, uncertainty surrounding elections in the United Kingdom, and an upcoming jobs report.
"Shortly after 2:30 p.m., however, the market decline began to steepen and, by 2:42 p.m., the DJIA was at 10,445.84, representing a decline of approximately 3.9%. The DJIA then suddenly dropped an additional 573.27 points, representing an additional 5.49% decline, in just the next five minutes of trading, hitting 9,872.57 at 2:47 p.m., for a total drop of 9.16% from the previous day's close," she said.
Industry experts said it was obvious that there was some sort of "algorithmic error" in the computerized trading systems that caused the pricing in the markets to collapse.
Some blamed the anomaly on a trader attempting to short-sell 16 million shares of S&P 500 stock, but instead of entering a "m" for million, he entered a "b" for billion. That error allegedly sent high frequency traders scurrying, causing liquidity to vanish.
"While we cannot yet definitely rule that possibility out, neither our review nor reviews by the relevant exchanges and market participants have uncovered such an error," Schapiro testified.
In my last two articles, the context has been the opportunities and challenges that financial institutions (FIs) have with implementing private clouds successfully. But what about public clouds?
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