Dow Jones Industrial Average lost more than earned in 2010

Dow Jones Industrial Average: the collapse of May 6 and the perpetrators of the tragedy

In brief: The collapse of Dow Jones Industrial Average and record the fall of other leading indices of U.S. stock market became the subject of the investigation.

May 6 Dow Jones Industrial Average surprised the financial world. Record drop in Dow Jones Industrial Average was a shock to investors, many players will be permanently lost to the market because of this tragedy. The U.S. has not yet established the cause of the record-shattering exchanges.

A week ago, on U.S. exchanges came a record decline. May 6 for a few minutes the main stock index fell over 9.8 percent, and market participants have lost several hundred billion dollars. Later exchange rates could play an unexpected fall, but still finished the session in the red. Elucidation of the causes of the collapse in market share taken by financial regulators of the USA, but so far they have been unable to come to certain conclusions. May 6 was one of the most turbulent days in the history of U.S. stock market. Shortly before 15:00 local time exchange rates began to decline sharply. Reduce by an average of 8-9 per cent. In particular, the Dow Jones index fell by 8.2 percent, or almost 1000 points. A similar fall within a single trading session was not observed for all time of existence of the indicator. Some traders said that the panic on the stock exchange that occurred during the falling in front of quotations, was “just like in the ‘twilight zone’.” Most likely, traders had in mind not only the well-known work of Stephen King, but “a zone of uncertainty”, which said Harvard economist Frank Taussig. In such “twilight zones” are significant fluctuations in prices and sharp rises are possible as the market, and significant fall. Either way, the collapse of the indices lasted about half an hour, and then began to regain market decline. Nevertheless, as a result of trades the S & P 500 fell 3.24 percent to 1,128.15 points, Nasdaq had lost 3.44 per cent to 2,319.64 points and the Dow Jones fell 3.2 per cent, stood at 10520, 32 points.

According to some data, the total losses of investors as a result of the collapse of the value of shares amounted to more than 460 billion dollars. Falling U.S. indexes “longing” for himself and the Asian and Russian markets. In the morning on May 7 Japanese Nikkei index dropped to 3,2 per cent, while the Korean Kospi – on 1,5 percent. However, the Federal Service for Financial Markets Russia Russian exchanges prudently sent letters in which he urged caution in response to falling U.S. index, as it might be due to technical failure. The question of what exactly caused the crash on U.S. stock exchanges, has speculated anew in the media in the evening the same day, May 6. First, the media reported that the fall of the indices was caused by a typographical error in the transaction, most likely, on the Nasdaq. Presumably, a trader makes a trade that has posted on the Exchange application for sale of shares amounting to 16 billion (instead of 16 million dollars). This is supposedly enough to start the process of active sales of securities in all markets, which led to the collapse. According to some reports, the incorrect data entry staff was involved in Citigroup. However, the bank said that they had no evidence of the involvement of their employees for the erroneous operation. Judging by the fact that the media, this topic was not discussed so much zeal, as in the first hours after the collapse, the evidence of this version really has not been found.

Later, the representative of the Exchange NYSE Rick Adamonis confirmed that during the bidding were a number of erroneous transactions. And the NYSE, and Nasdaq said that had to cancel a number of transactions made in the interval between 14:40 and 15:00 local time. May 7 investigating the incident broke Securities and Exchange Commission, SEC and Commodity Futures Trading Commission, CFTC USA. They issued a joint press release in which he promised to find out the reasons for “unusual activity” at the auction and to protect the interests of investors. SEC and SFTC also reported that its findings and recommendations to market participants, they will present after the investigation. A few days later, media reported that the SEC has rejected as a possible cause of the collapse of a hacker or terrorist attack. In addition, according to the Office, it is unlikely that one mistake trader entailed a collapse indices at various venues. Rather, consider the SEC, the cause was “coincidence”. On May 12 head of SEC Mary Shapiro (Mary Schapiro) reported that the agency has issued a “few” first subpoenas in its investigation. However, the SEC did not disclose the recipients of these subpoenas. Sources by Bloomberg say that along with the issuance of subpoenas SEC also “eyeing” for market participants to see if there was someone from the company benefited from record lows indices. Usually the reasons for such a serious fall in the stock markets are becoming known pretty quickly. It happens that traders with sufficiently high probability in advance can predict the negative impact of any developments on the markets. However, in this case, the reasons for the collapse is still unclear, but the investigation seems to be surrounded by a veil of reticence and ambiguity. Will be even more interesting result, of course, if we ever know about it.

Ukrainian Globalist
2010-05-16 09:08, Economics.

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