Thread: NYSE dumps trading curbs

What in the heck are they thinking?

Originally Posted by offtrack

I don't know if this was already posted but it is worth a look again. My innate paranoia makes me wonder about these rule changes.


http://www.bloomberg.com/apps/news?p...D8w&refer=home

This makes out of the money puts more attractive as a lottery ticket.

This is VERY significant.

I was in the market on the day it crashed in '87. You couldn't do a trade because you couldn't reach a broker on the phone to enter the order for you. And you couldn't do the trade yourself because that was before the internet.

The whole idea then was to put circuit breakers in place to stop the automated computer trades, and give human beings an equal shot at getting a trade executed. The circuit breakers were/are important because without them, you have the possiblity of a 20%+ plus fall in a single afternoon of trading.

I think this is a HUGE mistake on the part of the NYSE- and benefits only huge holders, not the little guy.

Bad news for Joe Sixpack, once again.

shorts are lickin their chops....just in time for the Fed to hold steady and sub-prime to REALLY kick in

Originally Posted by FUTURESTRADER

shorts are lickin their chops....just in time for the Fed to hold steady and sub-prime to REALLY kick in

You bet and the new folks, you have never seen pain like this before, if it happens.

Originally Posted by Fivetears

What in the heck are they thinking?

1) Gotta get all the gusto you can before the party's over.
2) More hot air makes the balloon stay up.
3) Need a stopgap in case the Fed throws a curveball intead of low and outside like we signaled.
4) We have complete confidence in this mission, Dave. [our computers are infallible]
5) Think? What does that have to do with it?

Originally Posted by James48843

This is VERY significant.

I was in the market on the day it crashed in '87. You couldn't do a trade because you couldn't reach a broker on the phone to enter the order for you. And you couldn't do the trade yourself because that was before the internet.

The whole idea then was to put circuit breakers in place to stop the automated computer trades, and give human beings an equal shot at getting a trade executed. The circuit breakers were/are important because without them, you have the possiblity of a 20%+ plus fall in a single afternoon of trading.

I think this is a HUGE mistake on the part of the NYSE- and benefits only huge holders, not the little guy.

Bad news for Joe Sixpack, once again.

Don't forget, that could also be a 20% GAIN in one afternoon.

Originally Posted by nnuut

Don't forget, that could also be a 20% GAIN in one afternoon.

Oh if it were true, nnuut. But I don't think there's been a 20% one day gain. What could create that kind of surge??? Capture Bin Laden? Extra terrestrials show us how to...???

What would create a 20% drop? With the computer generated BUY Programs you really don't know how high it can go if the majority of them kick in at the same time. It works both ways!

Article in the WSJ on 10/16/07 talks about the trading curbs. Paraphrased as follows.

What it comes down to is this. The curbs are outdated. In 1987 most trading was done on a pad of paper. By time the price flew by on the ticker, it was nowhere near the last transaction. In 87, the NYSE computers could only handle about 95 transactions a second. Today they handle over 38,000 a second. That day in Feb 2007 caused the NYSE to take in about 15,000 orders per second. NYSE hopes to be able to handle about 64,000 a second by year end.

The bigger problem is that as more and more trading occurs away from the NYSE trading floor (another obsolete concept) the actual Specialists will no longer be there to smooth out the volatility. However, the 1987 event couldn't even be thwarted by the Specialists.

I'm more concerned with the removal of the 'Uptick Rule' and the reckless behavior of some of these speculative hedge funds. I wasn't there, but it seems that the computer glitch was the main cause of the 87 Crash. Personally, I think that we as a society rely way too much on computers.

Originally Posted by Bullitt

........

I'm more concerned with the removal of the 'Uptick Rule' and the reckless behavior of some of these speculative hedge funds. I wasn't there, but it seems that the computer glitch was the main cause of the 87 Crash. Personally, I think that we as a society rely way too much on computers.

Ok, I watched the 87 crash coverage on MSNBC this weekend to get a perspective from what actually happened that day. I really feel that the humans caused this one. Anytime you release the fear at the level it was that day, you are bound to end up in trouble. The only difference I see about using computers rather than paper and pen is that more people can transact simultaneously rather than forming a queue. But then again, that is exactly what the computer does: Rack and stack the orders and processes them. Yes, it is humans that do transactions, humans that created computers and humans that write the code to accomplish this.

As far as the Uptick rule. I thought they got rid of that in July or are you referring that's the problem?