The Man Who Broke Britain

[JTrader]

Hi

9/11 occurred the year before I took up an interest in financial markets.
Please pardon my ignorance - but could someone try and briefly explain what exactly happened to financial exchanges around the world, on that day.

Many thanks

jtrader.

 

[Airthrey Capital]

The attacks had significant economic repercussions to the United States and world markets. The New York Stock Exchange, the American Stock Exchange and NASDAQ did not open on September 11 and remained closed until September 17. New York Stock Exchange (“NYSE”) facilities and remote data processing sites were not damaged by the attack but member firms, customers and markets were unable to communicate due to major damage to the telephone exchange facility near the World Trade Center. When the stock markets reopened on September 17, 2001, after the longest closure since the Great Depression in 1933, the Dow Jones Industrial Average (“DJIA”) stock market index fell 684 points, or 7.1%, to 8920, its biggest-ever one-day point decline. By the end of the week the DJIA had fallen 1369.7 points (14.3%), its largest one-week point drop in history. U.S. stocks lost $1.2 trillion in value for the week.

 

[trendie]

The attacks had significant economic repercussions to the United States and world markets. The New York Stock Exchange, the American Stock Exchange and NASDAQ did not open on September 11 and remained closed until September 17. New York Stock Exchange (“NYSE”) facilities and remote data processing sites were not damaged by the attack but member firms, customers and markets were unable to communicate due to major damage to the telephone exchange facility near the World Trade Center. When the stock markets reopened on September 17, 2001, after the longest closure since the Great Depression in 1933, the Dow Jones Industrial Average (“DJIA”) stock market index fell 684 points, or 7.1%, to 8920, its biggest-ever one-day point decline. By the end of the week the DJIA had fallen 1369.7 points (14.3%), its largest one-week point drop in history. U.S. stocks lost $1.2 trillion in value for the week.

All of the above is true.

Also true is the fact that the Dow ended the year UP from BEFORE the event.
( although it ended lower than the start of the year )

All the "lost" value was a short-term knee-jerk reaction. The loss of 1.2trillion was paper-loss - and eventually regained.

Although the events generated an understandable emotional reaction, the longer term events have shown that sense prevailed, and the scale of the event, though catastrophic, showed also resilience, in both people, and markets.
( the enforced closure was necessary to stop a true meltdown through panic. It gave people the chance to stop and take stock, and start thinking before doing anything )

Events and patterns have to be seen in context of the bigger picture.
( the Dow had already fallen precipituously BEFORE Sep 11 )

 

[jmreeve]

how can a trader try to ensure that their hedge position neatly cancels out the first trade (more or less), rather than adds to the loss of the first trade? (hope that all makes sense)

You should hedge the original position with the most correlated instrument on another exchange.
The number of contacts you will need to optimise the hedge depends on volatility and correlation factor.

 

[TWI]

under what circumstances would/have direct exchange connections go/have gone - down?

Two main reasons;
1. There is a problem on the telco line. I am referring to a direct point to point line from trading office to clearer. The clearer then has similar point to point lines direct to various exchanges. In my case this is not an IP connection it is on a separate network to avoid any IP contamination. Usually due to some engineer messing around or workmen digging up the road somewhere on the route.
Do not believe it when telcos sales say they are selling an SDH protected circuit on local loop, they are all full of b/s, they just charge you more and the contracts do not pay back anything unless the downtime goes on forever and that is a pittance anyway...rant,rant!

2. The exchange server goes down. This happened in the past because the exchange could not handle the volume of electronic transactions generated by automated trading platforms, particularly the spread traders, which kept cancel/replacing outright orders in many different instruments continuously as the relative price changed. Whenever an electronic exchange does any sort of upgrade it is best to expect the worst and try to be flat overnight. In the past the idiots have tried to run upgrades on things during the session with disastrous consequences. they also lie over the phone when you ask about delays and freezes, it is never their fault and whats more none of them know anything about customer relations. Basically they are on the whole greedy, nasty *******s who charge too much and don't give a toss about the traders who use their services.

What is a direct exchange connection? is it simply the link to an exchange that any Direct market access trader would have?

Can be via IP connection but if you need speed then better have a dedicated point to point link. A couple of years ago I tried to trade over an IP platform for a week and had a 2mb ip connection with only 20:1 contention ratio. It was sh1te. Easyscreen do an IP based exchange product called easyactive trader and a few people I know use that to trade Eurodollars on CME, they think it is OK but still have the direct lines for Liffe and Eurex.

by telco problems - do you mean Internet connection problems?

Telcos are generally a bunch of incompetents when it comes to connection problems. Particularly when you are screaming obscenities down the phone at them while trying to cancel orders with the exchanges on the other line. It is generally accepted that IP has problems at times but a direct connection which is alledged to be SDH protected should not go down so they deserve some presure when that happens...b*stards.

Why would an entire exchange go down to some catastrophe? and when has this happened previously? Would this automatically result in any open trades becoming non-exitable?

This has already been answered. Catastrophes I can accept but some geek who has no risk on the line p1ssing about on the server, that is another matter. Saying all that most of the time everything works just fine. Did have a nasty a few months ago where everything appeared fine but you could not pull any orders, nasty when you are legging. There was also one where only one exchange would not accept orders so when one leg was done elsewhere and went to hit or lift other exchange there was no response. these are unpleasant experiences but fortunately quite rare.

 

[JTrader]

Thanks guys - for keeping track of my multiple questions!

Cheers

jtrader.

 

[JumpOff]

All of the above is true.

Also true is the fact that the Dow ended the year UP from BEFORE the event.
( although it ended lower than the start of the year )

All the "lost" value was a short-term knee-jerk reaction. The loss of 1.2trillion was paper-loss - and eventually regained.

Although the events generated an understandable emotional reaction, the longer term events have shown that sense prevailed, and the scale of the event, though catastrophic, showed also resilience, in both people, and markets.
( the enforced closure was necessary to stop a true meltdown through panic. It gave people the chance to stop and take stock, and start thinking before doing anything )

Events and patterns have to be seen in context of the bigger picture.
( the Dow had already fallen precipituously BEFORE Sep 11 )

That paper loss was only regained by the people who were able to hold on through the 14.3% draw down. I've discussed this problem on other threads.
http://www.trade2win.com/boards/showthread.php?t=11793
At the time, I was curious about limiting my losses to as little as $500 if some terrorist attack shut down the exchanges again.- I know that is silly now, but doesn't the idea work a little better if I'm talking about limiting my losses to 3-5K?

I expressed the idea of routinely making a once a month purchase of 'deep out of the money' put options equal in number to the long futures contract you take if you are trading intraday, as an 'insurance policy.' Basically everyone said it was a bad idea. Said I was lose more in option premium than I would make by trading futures contracts. I'm not sure I agree yet. I looked at this grid:
http://www.ccstrade.com/quotes/options/es2005fp/
and if I read the figures correctly, today I can buy a ES put option that is 50 points away from the current strike price for about $250 and has $45 days left till expiration..

Again, if I understand the pricing correctly, after spread and commissions, I could pay for that premium with one positive 6 point ES trade. I wonder if I've got the numbers wrong ($250 seems really low), if so, I expect someone will point out my error. In this situation I am hoping the option expires worthless, I would only expect it to be useful in case I had an open position and an outlier event occurred.
JO

 

[JumpOff]

(incidentally, if thats a route you go down, it might be worth your while looking at prices of 1-touch otm options as well as vanilla puts. May be more cost effective. Just a thought.)

What's a "1-touch otm option"?
JO

 

[TheBramble]

What's a "1-touch otm option"?

http://64.94.171.14/fxcm-co/europeanCalculatorPage.jsp

 

[minx]

Hi

9/11 occurred the year before I took up an interest in financial markets.
Please pardon my ignorance - but could someone try and briefly explain what exactly happened to financial exchanges around the world, on that day.

Many thanks

jtrader.

Eurex was fine, the Bund went insanely thin though and was really choppy for a few days after but no tech troubles.

 

[ardhill]

Just wonder of anyone is considering a multi day trade starting the 4th January.

Long on Oil and / or Short on Financial sector in the UK market?

And for those of you who think that this would be pure gambling and not trading, I have another question...

If your set-up looked good, would you consider taking a short position in oil and and / or a long position in the financials over that week?

Or was this just a television programme and won't influence anyone in the business, therefore not influence the markets?

Does anyone know if they get BBC2 in the country where Bin Laden is?

 

[kumarsg]

If I remember correctly it took almost a year to recov er

 

[roguetrader]

If the setup looked good I'd take it. Though I doubt the setup of short oil is going to look all that promising too soon.

 

[TWI]

"markets influence events they anticipate". - Soros

 

[jmreeve]

LIFFE on the blink again.

For anyone who has any doubt about the number of time exchanges fail just look at the record
of LIFFE. This exchange can't seem to keep it's system running for more than a week or two at
a time without it falling over.

Think the man who broke Britain is more likely to be in the IT staff of an exchange.

Very annoying

 

[boy]

LIFFE on the blink again.

For anyone who has any doubt about the number of time exchanges fail just look at the record
of LIFFE. This exchange can't seem to keep it's system running for more than a week or two at
a time without it falling over.

Think the man who broke Britain is more likely to be in the IT staff of an exchange.

Very annoying

Thats liffe.....ermm

 

[miniboot]

sorry if I'm late to the party, but I just watched this and it was amazing, one of the best things the BBC has ever commissioned. hopefully they'll re-screen it at some point so more people can enjoy it.