What the market breakdown revealed

I don’t pretend to understand economics and finance and have a hard enough time comprehending even the most detailed and elaborate analyses in the press, though I try because it’s so important to our social affairs. The wild and historic one-day market plunge yesterday generated rampant news coverage with the basic storyline that no one really knew what caused it, though a technological glitch seemed to be the root of out-of-control frenzy. What interests me most, however, is the human factor that saved the day…

Let’s look at just two pieces, both from the Wall Street Journal, that provide a snapshot of the whole thing.

First, the mayhem.

The stock market plunged Thursday in a harrowing five-minute selloff that appeared to be triggered by a breakdown of trading systems. After dropping nearly 1,000 points, the market rebounded but still closed down 3.2%, leaving Wall Street struggling to figure out what happened…

Unnerved traders frantically searched for an explanation, scouring the trade blotters for clues to the cause…

Traders immediately said a market glitch must have contributed to the decline. They theorized that high-frequency trading firms, which use computer programs to trade and account for about two-thirds of the market’s overall volume, might have contributed to the speed of the decline…

But then look what happened

As other exchanges were in discussions over whether to cancel trades in a number of stocks including Procter & Gamble Co. that traded erratically Thursday afternoon, the New York Stock Exchange touted its move to switch the trading in P&G to a human auction to prevent things from spiraling out of control.

So at the end of the day…..humans were able to restore order again when the most advanced technology could not. And that’s a story I can understand.

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