HUMAN ERROR tied to New York Stock Exchange’s ‘disaster recovery configuration’ caused price swings

REVEALED: New York Stock Exchange’s ‘disaster recovery configuration’ was caused by HUMAN ERROR as hundreds of stocks experienced wild price swings and halted trades when markets opened yesterday

  • Aired by the exchange on Wednesday, the revelation comes after trading for dozens of stocks were halted Tuesday at the start of the day’s trading 
  • The complication caused 87 stocks – including those belonging to renowned blue chip firms – plunge at the opening bell before the problem was resolved
  • The issue led to chaos in the NYSE, as traders alarmed at the sudden drops – and, in some cases, surges – questioned what could be causing the ‘flash crash’ 

The New York Stock Exchange (NYSE) has disclosed the reason behind a dramatic drop in companies’ share prices this week – revealing that the ‘root cause’ was a ‘manual error’ made by a person.

Aired by the exchange on Wednesday, the revelation comes after trading for dozens of stocks were halted Tuesday at the start of trading, following what several had assumed was a technical issue.

The complication caused 87 stocks – including those belonging to famed blue-chip firms such as Morgan Stanley, Wells Fargo, and Exxon Mobil – suddenly fall and rise at the opening bell before the problem was resolved. 

The issue led to chaos in the NYSE, as traders alarmed at the sudden drops – and, in some cases, surges – questioned what could be causing the ‘flash crash’ that punctuated the market’s open, as several typically reliable stocks fell in value.

The New York Stock Exchange (NYSE) has disclosed a reason behind a dramatic drop in companies' share prices Tuesday that sent traders into a frenzy before the issue was resolved

The New York Stock Exchange (NYSE) has disclosed a reason behind a dramatic drop in companies’ share prices Tuesday that sent traders into a frenzy before the issue was resolved

The complication caused 87 stocks - including those belonging to famed blue-chip firms such as Morgan Stanley suddenly plunge at the opening bell before the problem was resolved

The complication caused 87 stocks – including those belonging to famed blue-chip firms such as Morgan Stanley suddenly plunge at the opening bell before the problem was resolved

In a statement Wednesday morning, officials at the exchange shed some light on what had happened, revealing that it was tied to the company’s ‘disaster recovery configuration’ prior to the market’s open.

‘The root cause was determined to be a manual error involving the Exchange’s Disaster Recovery configuration at system start of day,’ the exchange said, referring to the complex system that assigns stocks an opening price at the 9:30am bell.

The exchange said that a manual test of this system – which uses the thousands of orders accumulated overnight and early morning to dish out share prices – on Tuesday somehow went awry.

Electing to not elaborate on the exact nature of the issue, NYSE officials insisted Wednesday that exchange systems are now ‘operational,’ and that ‘a normal opening’ for the day is expected. 

In a statement Wednesday - roughly 24 hours after the unrest - the exchange dais that the 'root cause' of the incident a 'manual error' that occurred prior to the market open

In a statement Wednesday – roughly 24 hours after the unrest – the exchange dais that the ‘root cause’ of the incident a ‘manual error’ that occurred prior to the market open

Typically, when the NYSE opens at 9:30am, stocks are given an 'opening price.' To accomplish this, officials at the exchange compile sprawling lists of buy and sell orders and synthesize a single price that is provided at market open. This practice fell flat on Tuesday, officials said

Typically, when the NYSE opens at 9:30am, stocks are given an ‘opening price.’ To accomplish this, officials at the exchange compile sprawling lists of buy and sell orders and synthesize a single price that is provided at market open. This practice fell flat on Tuesday, officials said

As the day’s close approaches, the exchange has so far proved correct in their promise – with trading, for the most part, resuming as normal.

Typically, stocks open for trading on the NYSE at 9:30am, at which point a stock is given an ‘opening price.’

To accomplish this, officials at the exchange compile sprawling lists of buy and sell orders and synthesize a single price that is provided at market open. 

Wells Fargo saw its stock dipped by 5 percent on Tuesday morning before returning to normal

Wells Fargo saw its stock dipped by 5 percent on Tuesday morning before returning to normal

McDonald's also saw a plunge, with the stock remaining lower than when it closed Wednesday

McDonald’s also saw a plunge, with the stock remaining lower than when it closed Wednesday

Verizon saw a whiplash as its stock opened high 7 percent up before falling by 8 percent

Verizon saw a whiplash as its stock opened high 7 percent up before falling by 8 percent

Meant to balance out supply and demand and reduce volatility, the practice seemingly fell flat on Tuesday, with exchange officials having initially said that this pricing process ‘did not occur’ that day for several stocks. 

Following the exchange’s statement Wednesday, it can be assumed that a manual test of the system – which is carried out by human staffers – somehow went awry.

That cause shares belonging to famously steady stocks like McDonald’s and Walmart plummeting, while others such as Verizon suddenly surged, going up 7 percent, before immediately falling back by 8 during the brief trading pause, which ended just before 10am.

In total, more than 1,300 trades and 87  stocks were impacted by the error, now confirmed to be a result of human error.

In total, more than 1,300 trades and 87 stocks were impacted by the error, now confirmed to be a result of human error

In total, more than 1,300 trades and 87 stocks were impacted by the error, now confirmed to be a result of human error

The exchange has since said identified 4,341 trades they said should be canceled. The Securities and Exchange Commission (SEC), which was created after the infamous Wall Street Crash of 1929 that spurred the Great Depression, has said that it is investigating the issue.

On Tuesday, Ed Moya, a senior market analyst at Oanda, a leading online trading broker, remarked at the unrest caused by the malfunction, as traders found themselves at a loss as to the sudden surges and plummets of what are typically considered reliable stocks.

Speaking to  Bloomberg, Moya commented on the magnitude of the price fluctuations, and the repercussions they could have had on the economy if they had been real and not made in error.

The Securities and Exchange Commission (SEC), which was created after the infamous Wall Street Crash of 1929 that spurred the Great Depression, said that it is investigating the issue

The Securities and Exchange Commission (SEC), which was created after the infamous Wall Street Crash of 1929 that spurred the Great Depression, said that it is investigating the issue 

‘These are not your typical meme stock, easily manipulated companies,’ the trading expert said. ‘These are Morgan Stanley, Verizon, AT&T. These are some of the giants.’  

Tuesday’s incident was the latest example of a ‘flash crash,’ which sees stocks suddenly turn volatile on the market due to an error. 

One such ‘flash crash’ occurred last year when a Citigroup trader put in an error in the European market, causing stock indexes to plummet before triggering a halt.

Perhaps the most well-known crash occurred in 2010, when a $1 trillion stock market crash hit Wall Street, triggered by Navinder Singh Sarao.

Tuesday's incident was the latest example of a 'flash crash,' which sees stocks suddenly turn volatile on the market due to an error

Tuesday’s incident was the latest example of a ‘flash crash,’ which sees stocks suddenly turn volatile on the market due to an error

Sarao was sentenced to one year of home detention in 2020 pleading guilty to wire fraud and market ‘spoofing’ – placing large orders to manipulate prices before quickly cancelling them. 

US authorities say he sent a jolt of fear through the market which contributed to a sudden tanking of shares on May 6, 2010, in which nearly $1trillion was briefly wiped off the value of companies. 

All exchange systems are now operational, the exchange said Wednesday, with no further unrest expected, the NYSE said Wednesday.

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