The Day the Stock Market Died
It was a Monday. Asian markets opened, and not one financial product traded—the whole day. Farther west, frozen bids and offers produced multicolored flat-lined charts on every European screen. The American markets followed suit. For days, single names rarely dealt. Now ETF’s failed to trade on any exchange or dark pool. The financial community was abuzz.
The next day, stock, bond, currencies, and commodity markets didn’t crash. Prices didn’t bob up and down. The underlying price of every asset remained exactly the same; options’ bids vanished. The financial world was staggered.
On Wednesday, VIX and VIX-like products registered zero. While Main Street plodded along, Wall Street panicked. Mid-morning, Compliance and IT support were pared again—this time to bone marrow. Once end-of-day reports were verified, middle and back-office staffs were severed.
Unfettered, traders’ keystrokes peddled rumors mixed with pornography. Unbowed, quants with PhDs insisted their models were exact. Thursday passed without a trade anywhere in the world. Secretaries were let go; gourmet coffee and catered lunches became distant memories.
Perfectly hedged and the last fraction of a penny squeezed out of every trade; no volumes changed hands for the fifth consecutive day. Their usefulness expired; firms exercised put options on every trader, risk, and quantitative analyst. Unpaid interns were retained to oversee all automated front, mid, and back-office operations.
Determined to save their livelihoods, political and financial titans descended upon New York. Late Saturday business vultures confirmed “there were no more human scraps.” On Sunday, social media declared the heart and soul of capitalism was dead.
After a restless night, at the opening bell on Monday morning a weary day trader from rural Mississippi studied his screen. Prices of ETF symbols: SPY, DIA, QQQ, VXX, UWTI, and GDX that once flashed regularly stayed solid; nothing had flickered in over a week.
“Ain’t that somethin’,” thought the self-taught man.
"Stocks" he barked.
A secondary window populated with equity symbols opened. Stocks such as AAPL, GE, F, TSLA, GOOGL, AMZN, BA, and FB displayed tight active quotes, yet their accompanying charts were horizontal lines. Suspiciously he maneuvered his cursor over FB’s offer price. It had been over a year since he personally initiated a trade; his customized software robotically executed every buy and sell order. He clicked on the offer price and purchased his default volume of 67.33333 shares of FB. Immediately his screen burst with activity. Some digits flashed green, others pulsated red. Five instantaneous chimes alerted him a handful of automated order executions had been completed. The stock operator navigated back to his main window to review his first trades in a week. He sold short 30 shares of the ETF DIA at $50.00001. He covered his short DIA position at $50.00. He sold 67.33333 shares of FB at the exact same price he purchased them. His next trade he went long 30 units of DIA at $50.00. A millisecond later, he sold 30 units of DIA at $49.99999.
His screen motionless, he turned his attention to the pundits on TV. All crowed about the wonders of block-chain technology; that the six second flurry of activity which generated volumes in the billions proved the market was sound. The avid trader rolled his eyes, muted the TV, and listened eagerly for another eruption of notification chimes; the sweet music that kept him in tune each day. Nothing. When lunch passed without a jingle; his stomach tightened. An hour later, his anxiety had grown longer than the linear chart lines etched on his screen.
He tried to reassure himself, “I have a chair; everything is fine.”
But the chronic silence proved too much. He pleaded for the market gods to give him a sign. He impatiently moved his cursor over the bid of BA. Just then a celebrated panel of PhDs’ representing high frequency traders rang the NYSE closing bell.
It was a Tuesday. The BA bid remained. Soon Main Streets across Mississippi, America, and the globe would be great again.
About the author: Note: The premise of this story is based on an article I read over 30 years ago while a member of the CBOE. I “think” the article was published in the financial newsletter Securities Week sometime in 1985 or 1986. It was a theme I’ve never forgotten – my gratitude to the unknown author.