Hi, Donna,
As I recall, on Black Monday, Morgan Stanley was still one of
our (I.P. Sharp) major customers running SHARP APL on a suitable
number of their mainframes, which were likely IBM 308x complexes.
The story I heard from an insider ran along the following lines,
about the sorts of failures that arose that day:
1. Trading volumes and currency volumes were so high that some
"traditional" trading companies, with their automated systems
written in C-likelanguages, suffered from integer overflow,
which did NOT crash their systems. Rather, they merely
collected a (2*32) or similar residue on the volumes and
other numeric data of interest, which resulted in traders
being given extremely misleading data (clearly no longer
information at this point...), which resulted
in the traders working themselves into very deep holes.
2. Other companies, running COBOL-like languages, crashed when
their code encountered integer overflows. Being sensible firms,
they had written transaction logs, which faithfully tracked all
work that day. When the systems came back up, they carefully
replayed all the transactions, hit the integer overflows, and crashed.
3. Even other companies, running some other languages, were
unable to keep up with trade rates, and although they did not crash,
fell far behind, giving traders misleading data, which became
more misleading as the day went on.
4. Morgan, and presumably others running APLish systems,
observed two effects: First, the systems did slow down, due to
the high trading volumes. They did not crash, because integer
overflow merely meant that ongoing computations were in
floating point, rather than in integer.
This caused further slowdown, but not disasterously so.
5. Morgan made money that day. Not a lot, but certainly more than
their competitors.
I no longer have contacts with people who are/were at Morgan,
but as the story I heard is not in line with the "Morgan Stanley
was taken for a ride" claim, it would nice to learn more about
what really happened.
Bob
On 2019-08-09 7:59 p.m., Donna Y wrote:
Investigations after the October 19, 1987 crash revealed that what would have
been a normal down day in a correction that had begun in August was turned into
the heart-stopping, portfolio destroying 1987 crash by uncontrolled automated
waves of sell-programs that flooded in from program-trading firms and
overwhelmed the market. As their ‘portfolio insurance’ protective stops were
successively hit the automated sell orders came so fast on top of each other at
ever lower prices that market-makers could not match them up with buyers. Very
quickly there were no buyers anyway, and the decline just plunged into a dark
bottomless hole.
This was the beginning of programmed trading.
At the insurance company where I worked the investment department was not even
affected but I heard Morgan Stanley was taken on a ride by their new program
trading software.
Natural disasters like what happened with the earthquake in Japan you mention
are not predicted but even a tweet from Trump can perturb the market or as what
happened in 1981:
The selling spree was set off by Joe Granville's January 1981 newsletter, which advised investors
to "sell everything". It was later described by Business Week magazine as "a
mindless wave of selling that destroyed billions of dollars in stock value from a forecaster who
drops his pants in public to get attention."
Donna Y
[email protected]
On Aug 9, 2019, at 7:09 PM, Jose Mario Quintana <[email protected]>
wrote:
Regarding Black Monday, apparently, the ones who knew better did not have
enough conviction to short the S&P500 in any considerable amount before the
event occurred.
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Robert Bernecky
Snake Island Research Inc
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Ward's Island
Toronto, Ontario M5J 2B9
[email protected]
tel: +1 416 203 0854
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