The mistake of one lax employee has sent shockwaves through the financial world and wiped billions of dollars off the charts for some of the globe’s largest companies.
If you thought you were having a bad day in the office, spare a thought for this Wall Street worker who may have single-handedly brought down the US stock market.
A simple human error reportedly triggered wild swings and volatility on the New York Stock Exchange (NYSE) when trading opened in the morning.
More than 250 companies suffered from wild swings in just a couple of minutes, with stocks changing by 25 per cent of their normal market value.
Big brand names were caught up in the catastrophe including McDonald’s, Walmart, Exxon Mobil, Wells Fargo and Morgan Stanley.
Tens of billions of dollars were wiped off in market value.
As confusion set in, the NYSE came clean, admitting that the “root cause” of the screw-up was a “manual error”.
According to Bloomberg, a staff member at the NYSE backup data centre reportedly failed to properly shut down Cermak’s disaster-recovery system, prompting the crisis.
The crux of the issue lies in the fact that by leaving the backup system running, the exchange’s computers thought that trading had not ceased from the day before.
Traders work on the floor at the New York Stock Exchange in New York. Photo / AP
As a result, some stocks behaved as if trading had already started, with no opening prices being set, sending the market into a meltdown.
The regulator, US Securities and Exchange Commission, indicated it was investigating the matter.
The NYSE said it will declare the trades carried out with incorrect prices null and void.
Overall, about 4341 trades went through that “should be busted,” or cancelled, the NYSE said in a market update.
Around 84 stocks were affected and marked as “aberrant”, the exchange added.
And it wasn’t just the NYSE that was impacted.
The chaos had flow-on effects which spread to Nasdaq, CBOE Global Markets and private venues.
The total cost of the disaster is as yet unclear.
Under the exchange’s rules, the NYSE may have to foot the bill and fork out hefty compensation fees.
Companies dragged down in the mayhem have until Friday local time (so until Saturday) to make a report about the financial damages they incurred.
Ironically, the NYSE worker’s failure didn’t even occur in New York, but 1100km from Wall Street.
Ever since the 9/11 terror incident on the twin towers, the NYSE has had a secondary location in case something knocks out the capabilities of its head office.
Accordingly, the error took place in the exchange’s Chicago location.
The co-founder of professional trading firm Themis Trading LLC, Joseph Saluzzi, was far from impressed over the debacle.
“They’re going to need to come up with something better,” he said to Bloomberg. “Though systems fail, and we understand that, there’s zero tolerance when it comes to the opening and the close.”
