No price discovery for over an hour!!

C

Cabin111

I was thinking about the 1987 crash...You can look it up if you want.

Because if it, they have put in circuit breakers to cushion the blows (market collapse).

Was wondering if some of you could tell me, if the following paragraph, could happen again in the markets. I am thinking about price discovery to be specific.

Understanding the Stock Market Crash of 1987
After five days of intensifying declines in the stock market, selling pressure hit a peak on October 19, 1987, also known as Black Monday. Steep price declines were created as a result of significant selling; total trading volume was so large that the computerized trading systems could not process them. Some orders were left unfilled for over an hour, and these order imbalances prevented investors from discovering the true price of stocks.

We saw what happened to Robinhood and GameStop/AMC...Price/options.

So the question is...Can there be an extended period of time (minutes/hour/s) when no price discovery could happen?

PS 9/11 stopped the market discovery for days...
 
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It depends on what part of the trading environment caused the failure. Spreads would widen and size would shrink. There is pretty significant redundancy in both trading and clearing. There are lots of single list/monopoly products so that would be a problem. Discovery itself would be less efficient with parts of the environment unavailable. If you recall with 9/11 the rush to get reopened included the goal to make 3rd Friday expirations. Today with multiple expirations that would also present a possible problem. Lose discovery in one or two venues in Apple and there are lots of discovery locations still available. Lose the ability to have price discovery in S&P 500 and that becomes very problematic. Different venues may or may not choose to crack their monopoly
 
ajacobson said:
It depends on what part of the trading environment caused the failure. Spreads would widen and size would shrink. There is pretty significant redundancy in both trading and clearing. There are lots of single list/monopoly products so that would be a problem. Discovery itself would be less efficient with parts of the environment unavailable. If you recall with 9/11 the rush to get reopened included the goal to make 3rd Friday expirations. Today with multiple expirations that would also present a possible problem. Lose discovery in one or two venues in Apple and there are lots of discovery locations still available. Lose the ability to have price discovery in S&P 500 and that becomes very problematic. Different venues may or may not choose to crack their monopoly
More...

Was thinking of Apple and repatriated funds...You could do a complete upper level college business course on that subject alone!!

Try for price discovery for Boeing after 9/11...
 
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Cabin111 said:
I was thinking about the 1987 crash...You can look it up if you want.

Because if it, they have put in circuit breakers to cushion the blows (market collapse).

Was wondering if some of you could tell me, if the following paragraph, could happen again in the markets. I am thinking about price discovery to be specific.

Understanding the Stock Market Crash of 1987
After five days of intensifying declines in the stock market, selling pressure hit a peak on October 19, 1987, also known as Black Monday. Steep price declines were created as a result of significant selling; total trading volume was so large that the computerized trading systems could not process them. Some orders were left unfilled for over an hour, and these order imbalances prevented investors from discovering the true price of stocks.

We saw what happened to Robinhood and GameStop/AMC...Price/options.

So the question is...Can there be an extended period of time (minutes/hour/s) when no price discovery could happen?

PS 9/11 stopped the market discovery for days...
More...
In the futures market we were fully aware of the price. There was a bottle neck in clearing, but fills were being reported. Spread was one handle = $500.
 
Cabin111 said:
I was thinking about the 1987 crash...You can look it up if you want.
Because if it, they have put in circuit breakers to cushion the blows (market collapse).
Was wondering if some of you could tell me, if the following paragraph, could happen again in the markets. I am thinking about price discovery to be specific.
Understanding the Stock Market Crash of 1987
After five days of intensifying declines in the stock market, selling pressure hit a peak on October 19, 1987, also known as Black Monday. Steep price declines were created as a result of significant selling; total trading volume was so large that the computerized trading systems could not process them. Some orders were left unfilled for over an hour, and these order imbalances prevented investors from discovering the true price of stocks.

So the question is...Can there be an extended period of time (minutes/hour/s) when no price discovery could happen?

PS 9/11 stopped the market discovery for days...
More...
%%
Possible;
but not probable.
I thought i remembered the stock market closed , somewhat unexspected for Pres Bush funeral. And it was.
I was not there/LOL\ but in double checking this , sources noted same pattern / US Grant /funeral. market closed for a day DEC 5,1885:caution::caution:
 
Cabin111 said:
I was thinking about the 1987 crash...You can look it up if you want.

Because if it, they have put in circuit breakers to cushion the blows (market collapse).

Was wondering if some of you could tell me, if the following paragraph, could happen again in the markets. I am thinking about price discovery to be specific.

Understanding the Stock Market Crash of 1987
After five days of intensifying declines in the stock market, selling pressure hit a peak on October 19, 1987, also known as Black Monday. Steep price declines were created as a result of significant selling; total trading volume was so large that the computerized trading systems could not process them. Some orders were left unfilled for over an hour, and these order imbalances prevented investors from discovering the true price of stocks.

We saw what happened to Robinhood and GameStop/AMC...Price/options.

So the question is...Can there be an extended period of time (minutes/hour/s) when no price discovery could happen?

PS 9/11 stopped the market discovery for days...
More...

For sure, with the circuit breaker that's put in place, price discovery would not happen until trading resumes. Nobody would know what the price should be if nobody is trading. The circuit breakers are basically the forced stopping of processing of orders in the computer system. Back in 1987, price discovery couldn't happen because the computerized trading system couldn't process the trading volume fast enough now with circuit breakers, price discovery can't happen because we don't want to know what the price would be until after a period of time. And after a period of time, we will assume that people would've "calmed down" and would have wanted to start trading with more "reasonable" prices, aka higher price. LOL But the problem is, 90+% of the trades are generated by algorithms now so how are algorithms going to "calm down" and enter trades at more "reasonable" prices? So if the price is still slow, the market will just continue to be shut down? Until the machines want to trade at higher prices?

It will be interesting to see how effective circuit breakers are at stopping a significant downtrend with massive trading volume in the age of algorithm trading.
 
TheDawn said:
For sure, with the circuit breaker that's put in place, price discovery would not happen until trading resumes. Nobody would know what the price should be if nobody is trading. The circuit breakers are basically the forced stopping of processing of orders in the computer system. Back in 1987, price discovery couldn't happen because the computerized trading system couldn't process the trading volume fast enough now with circuit breakers, price discovery can't happen because we don't want to know what the price would be until after a period of time. And after a period of time, we will assume that people would've "calmed down" and would have wanted to start trading with more "reasonable" prices, aka higher price. LOL But the problem is, 90+% of the trades are generated by algorithms now so how are algorithms going to "calm down" and enter trades at more "reasonable" prices? So if the price is still slow, the market will just continue to be shut down? Until the machines want to trade at higher prices?

It will be interesting to see how effective circuit breakers are at stopping a significant downtrend with massive trading volume in the age of algorithm trading.
More...
It was called the flash crash , plenty of detailed studies on it
 
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