# What is a stock market "trading glitch"? **URL:** \ **Category:** Factual Questions\ **Created:** [May 7, 2010, 12:54am UTC](https://boards.straightdope.com/t/what-is-a-stock-market-trading-glitch/538575 "2010-05-07T00:54:17Z")\ **Posts on this page:** 14\ **Page:** 1
**Author:** ![ratatoskK](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ratatoskk/32/2987_2.png) [@ratatoskK](https://boards.straightdope.com/u/ratatoskK)\ **Post date:** [May 7, 2010, 12:54am UTC](https://boards.straightdope.com/t/what-is-a-stock-market-trading-glitch/538575/1 "2010-05-07T00:54:17Z")
[This story](http://www.nytimes.com/2010/05/07/business/economy/07norris.html?hp) about the plunge in today’s US and world stock markets says that part of the problem was caused by a “trading glitch” > [@](#): > > Some of the decline was real, but another part of it was simply trading gone awry. Temporary plunges in the price of Procter & Gamble and 3M, the former Minnesota Mining, cost the Dow about 300 points, and appeared to be the result of glitches, not intentional sell orders. Similarly, Accenture, a large consulting firm, fell from over $40 a share to one penny. What kind of “glitch” could this be? Are they saying there is an error in the trading software? ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [May 7, 2010, 12:58am UTC](https://boards.straightdope.com/t/what-is-a-stock-market-trading-glitch/538575/2 "2010-05-07T00:58:40Z")
Someone was trying to sell 15M shares and they “accidentally” set it up as a sale of 15B shares. Oops. Made it look like major players were just dumping stocks. ---
**Author:** ![Jackknifed\_Juggernaut](https://avatars.discourse-cdn.com/v4/letter/j/9de053/32.png) [@Jackknifed\_Juggernaut](https://boards.straightdope.com/u/Jackknifed_Juggernaut)\ **Post date:** [May 7, 2010, 1:00am UTC](https://boards.straightdope.com/t/what-is-a-stock-market-trading-glitch/538575/3 "2010-05-07T01:00:29Z")
Shitty Bank lives up to its nickname again. ---
**Author:** ![friedo](https://avatars.discourse-cdn.com/v4/letter/f/8edcca/32.png) [@friedo](https://boards.straightdope.com/u/friedo)\ **Post date:** [May 7, 2010, 1:23am UTC](https://boards.straightdope.com/t/what-is-a-stock-market-trading-glitch/538575/4 "2010-05-07T01:23:39Z")
> [@John\_Mace](#): > > Someone was trying to sell 15M shares and they “accidentally” set it up as a sale of 15B shares. Oops. I’m extremely dubious of this explanation. Institutional trading software doesn’t really work that way. I think a more likely explanation is a bug in an institution’s automatic trading algorithm that caused an unexpectedly large sell-off due to some combination of circumstances that nobody considered. Usually, these systems are supposed to check with a human if they’re about a dump billions of shares, but who knows. ---
**Author:** ![Lord\_Mondegreen](https://avatars.discourse-cdn.com/v4/letter/l/91b2a8/32.png) [@Lord\_Mondegreen](https://boards.straightdope.com/u/Lord_Mondegreen)\ **Post date:** [May 7, 2010, 1:41am UTC](https://boards.straightdope.com/t/what-is-a-stock-market-trading-glitch/538575/5 "2010-05-07T01:41:49Z")
Accenture is back over $40 now. Wonder how many shares were traded for $0.01. Buy 1 million shares for $10,000 and next day you have $40 million. Nice little earner. ---
**Author:** ![Ludovic](https://avatars.discourse-cdn.com/v4/letter/l/7ab992/32.png) [@Ludovic](https://boards.straightdope.com/u/Ludovic)\ **Post date:** [May 7, 2010, 1:42am UTC](https://boards.straightdope.com/t/what-is-a-stock-market-trading-glitch/538575/6 "2010-05-07T01:42:58Z")
I accidentally the stock market. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [May 7, 2010, 1:57am UTC](https://boards.straightdope.com/t/what-is-a-stock-market-trading-glitch/538575/7 "2010-05-07T01:57:16Z")
> [@friedo](#): > > I’m extremely dubious of this explanation. Institutional trading software doesn’t really work that way. > > I think a more likely explanation is a bug in an institution’s automatic trading algorithm that caused an unexpectedly large sell-off due to some combination of circumstances that nobody considered. Usually, these systems are supposed to check with a human if they’re about a dump billions of shares, but who knows. My source was MSNBC’s Cramer on Hardball today. Take it for what it’s worth. ---
**Author:** ![Billdo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/billdo/32/315_2.png) [@Billdo](https://boards.straightdope.com/u/Billdo)\ **Post date:** [May 7, 2010, 2:10am UTC](https://boards.straightdope.com/t/what-is-a-stock-market-trading-glitch/538575/8 "2010-05-07T02:10:09Z")
It’s sort of like the OJ futures trading scene in the movie Trading Places. Something starts the prices of stocks going down, and everybody starts selling to try to dump their position before prices totally crash. This sends prices plummeting further, which causes more selling, into a major spiral. Today’s issue was exacerbated by computer trading, which can instantly start dumping stocks when the programs see certain patterns developing. Eventually, people figured out that this was just insanity, and started trading in the opposite direction. ---
**Author:** ![Manduck](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/manduck/32/256_2.png) [@Manduck](https://boards.straightdope.com/u/Manduck)\ **Post date:** [May 7, 2010, 2:23am UTC](https://boards.straightdope.com/t/what-is-a-stock-market-trading-glitch/538575/9 "2010-05-07T02:23:34Z")
When I glanced at the price of P&G today I just about shit my pants. The list of things that could cause a stock like that to drop 27% in minutes is a very short one, consisting of maybe nuclear war and/or invasion from outer space. And, it turns out, a “trading glitch”. ---
**Author:** ![Captain\_Amazing](https://avatars.discourse-cdn.com/v4/letter/c/6de8d8/32.png) [@Captain\_Amazing](https://boards.straightdope.com/u/Captain_Amazing)\ **Post date:** [May 7, 2010, 2:35am UTC](https://boards.straightdope.com/t/what-is-a-stock-market-trading-glitch/538575/10 "2010-05-07T02:35:09Z")
> [@Lord\_Mondegreen](#): > > Accenture is back over $40 now. Wonder how many shares were traded for $0.01. Buy 1 million shares for $10,000 and next day you have $40 million. Nice little earner. Assuming those trades don’t get reversed. ---
**Author:** ![IAmNotSpartacus](https://avatars.discourse-cdn.com/v4/letter/i/cc9497/32.png) [@IAmNotSpartacus](https://boards.straightdope.com/u/IAmNotSpartacus)\ **Post date:** [May 7, 2010, 2:39am UTC](https://boards.straightdope.com/t/what-is-a-stock-market-trading-glitch/538575/11 "2010-05-07T02:39:59Z")
> [@Captain\_Amazing](#): > > Assuming those trades don’t get reversed. Some already have been canceled. [Bloomberg Businessweek - Bloomberg](http://www.businessweek.com/news/2010-05-06/nasdaq-to-cancel-u-s-trades-that-moved-more-than-60-update1-.html) ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [May 7, 2010, 2:56am UTC](https://boards.straightdope.com/t/what-is-a-stock-market-trading-glitch/538575/12 "2010-05-07T02:56:11Z")
> [@John\_Mace](#): > > My source was MSNBC’s Cramer on Hardball today. Take it for what it’s worth. The same thing was reported on the PBS news hour today. ---
**Author:** ![Trom](https://avatars.discourse-cdn.com/v4/letter/t/958977/32.png) [@Trom](https://boards.straightdope.com/u/Trom)\ **Post date:** [May 7, 2010, 3:05am UTC](https://boards.straightdope.com/t/what-is-a-stock-market-trading-glitch/538575/13 "2010-05-07T03:05:28Z")
> [@John\_Mace](#): > > The same thing was reported on the PBS news hour today. Trades greater than 60% away from the last print before 14:40 eastern are [broken](http://www.nasdaqtrader.com/TraderNews.aspx?id=ETA2010-30). Everything else stands. Absolutely crazy. This wasn’t a “fat finger” trade, it was heavy selling followed by panic selling coupled with a lack of liquidity. Corporate bonds, preferred stocks and closed end funds were getting hammered well before the general market drop off. Also, the fixed income markets and currency markets reacted before the equity sell off. A fat finger in Proctor and Gamble can’t have that kind of effect. A [VIX](http://en.wikipedia.org/wiki/VIX) that’s up 50% in a week in addition to a potential sovereign debt crisis is good enough for a market panic. ---
**Author:** ![Jackknifed\_Juggernaut](https://avatars.discourse-cdn.com/v4/letter/j/9de053/32.png) [@Jackknifed\_Juggernaut](https://boards.straightdope.com/u/Jackknifed_Juggernaut)\ **Post date:** [May 10, 2010, 9:14pm UTC](https://boards.straightdope.com/t/what-is-a-stock-market-trading-glitch/538575/14 "2010-05-10T21:14:25Z")
> [@Trom](#): > > Trades greater than 60% away from the last print before 14:40 eastern are [broken](http://www.nasdaqtrader.com/TraderNews.aspx?id=ETA2010-30). Everything else stands. Absolutely crazy. > > This wasn’t a “fat finger” trade, it was heavy selling followed by panic selling coupled with a lack of liquidity. Corporate bonds, preferred stocks and closed end funds were getting hammered well before the general market drop off. Also, the fixed income markets and currency markets reacted before the equity sell off. A fat finger in Proctor and Gamble can’t have that kind of effect. > > A [VIX](http://en.wikipedia.org/wiki/VIX) that’s up 50% in a week in addition to a potential sovereign debt crisis is good enough for a market panic. I think that you’re right. Two of my equity managers (I manage pension assets) did independent analysis on trading that day and found no glitch. Both concluded that the cause of the market crash was a combination of automated trading and lack of circuit breakers at some trading markets.