“Not with a decline, but with a miscalculation”: Apocalypse Dow, Reloaded


Post-hack ergo propter hack?

NewsOK clips the follow-up from AP’s Daniel Sorid to last year’s trading-system glitch at NYSE.

It is encouraging to see someone pursuing a mysterious major malfunction at a strategic tech Big Dig with this degree of doggedness.

Those who fail to learn from major systems malfunctions are doomed to repeat the last voyage of the Hindenburg.

See also

The item is from the (non)patented NMM Google News Alert on one of the more interesting words in the English language: glitch.

NEW YORK — With the stock market plunging, and the Dow Jones industrials already down hundreds of points, Wall Street’s most closely watched gauge dropped precipitously, in the process choking off electronic trading systems at the New York Stock Exchange.

Documents obtained by the Associated Press show a broader technological breakdown than previously acknowledged by the Dow.

One year later, details of the day’s events, described in documents obtained by The Associated Press, show a broader technological breakdown than previously acknowledged by Dow Jones & Co., creator of the famed 30-stock average, or the NYSE.

What is it with the AP and adjectives? Every pollster it wants us to believe in it describes as “respected.” Every leftist it wants us to fear it brands “fiery.”

What information does the adjective “famed” add to the story here, anyway? Yes, the average is famed. So famed that even I have heard of it. It almost goes without saying that it’s famed.

The documents are letters explaining what happened on Feb. 27, 2007, that were requested by members of the House Financial Services Committee. Copies of the letters, which have not been publicly released, were provided to the AP by Rep. Deborah Pryce, R-Ohio.

Letters from whom? Requestioned by which members? One of the Five Ws seems to be missing here.

The Democrats on the finance committee, we are told later, accepted the explanation at the time.

At its worst levels of the day, the Dow was down 546 points, or 4.3 percent. It ended the day down 416.02, or 3.29 percent, at 12,216.24.

Not with a decline, but with a miscalculation.

Part of the Dow’s drop turned out to be not a decline, but a miscalculation. According to Dow Jones’ account to Congress, high volume that day overwhelmed a data-checking program on the company’s Financial Information Distribution System, a server that delivers real-time trade data used to calculate Dow Jones index levels.

So far

That meant the readings of the Dow were delayed, and therefore misleading, beginning at about 12:50 p.m., but the discrepancy was not caught until 1:20.

So far, I am not learning anything that I did not already read a year ago.

At 2:56, Dow Jones employees flipped on a backup system, which wasn’t running the data-checking program. At 1:59, the Dow’s calculation caught up with the previous trades, falling 170 points almost instantaneously.

Promises, promises:

In its letter, Dow Jones promised Congress it would create an early warning system to alert it to problems with its feed of real-time data used to calculate its indexes.

Downplay.

In their letters, both companies downplayed the significance of the breakdown that day. Asked by members of Congress whether the Feb. 27, 2007, problems caused any damage to investors, Dow Jones, now a division of News Corp., described the Dow industrials as a “news item created by the editors of the Wall Street Journal” and not a listed security. Dow Jones also said it received no complaints from licensees of its indexes.

More downplay.

The New York Stock Exchange noted that the market was already beginning to recover when the brunt of its trading problems developed.

Pryce, then the ranking member of the House Subcommittee on Capital Markets, said last March she was satisfied with the market’s response. Pryce and Rep. Spencer Bachus, R-Ala., both members of the financial services committee, requested information from the companies the day after the market plunge, on Feb. 28.

This story does not establish to my satisfaction that the breakdown was broader breakdown than previously acknowledged.

In order to do that, it would have to review what the Dow acknowledged and show that breakdowns occurred that the Dow did not acknowledge.

May there is more to this story than ran in syndication here. Or maybe this is one of those tempests in a teapot.

I just think if you want to know about the performance complex technical systems, politicians are not the people you should be asking about it. Politicians tend to be notoriously dense about such things. (Al Gore included.)

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