While perusing charts and trading stats and other boring shits, I thought back to cows. I love cows (CME live cow futures, LE). Its a funny instrument, with the tightest breakers in futures at the CME. It used to be 3 points up or down, BAM! Shut down. Now, last I recall, it is 4.5 points. Those breakers (trading halts) have fired off many many times in the last 5 years. And that got me thinking to the horror of March 2020 on equity indices. When the breakers were created after the 1987 crash, how many times did they ever trip? I came into trading in 2014, and know the breakers never tripped between 2014 and March 2020. And they tripped hard, 4 separate times in March 2020. Yikes. Turns out, they tripped one other time, in Oct. 1997. I think that history is important to recall, because the higher these markets go, the easier they become to fall to the breaker level of 7, 14 and 20%. Or maybe I am just sillyshits. I dunno'. Just thinking out loud.
Well, the US market remained closed on 9/11, which effectively was a circuit breaker. This said, 2020 was unique due to the market positioning (and I think we are getting there again)
9/11 was not a breaker event. That was just the regulators being all like, this is fucked up, let's just be closed for a while, while Bush figures out who to kill for this.
The only thing that surprised me about the march 2020 event is it revealed the insane amount of money that was sitting on the sidelines waiting to be deployed. And boy did it get deployed!
Which is why I said "effectively". The decision to keep the markets closed was, in part, driven by the desire to prevent a massive drop. They kept it closed till next week and equities dropped a fair bit when it re-opened. IIRC, it was the longest market closure since the thirties. I was trading rates at the time and actually managed to get some trades in before the bond pits got closed. Anyway, this is too emotional for me so I'm gonna stop.
I am a bit more visceral in this sort of thing., When that bell went off on the NYSE floor after the open, two more timers? That had a clang of "finality". Like holy shit, this is happening, everyone is panicking to the point they gotta' halt the markets in the middle of everyone's eggs Benedict. The death bell!
I still think back to 1987...Yeah, us old timers. I tell people there was no price discovery!! They go..."what are you talking about". There was no market for a few hours (if I'm correct), because no one would put in a bid/ask!! The market was a total guess... PS I remember calling my broker (Morgan Stanley) that morning. I asked him something like "what is the price of Exxon"? He said I don't know!! I said something like "it was $60. the other day...Is it at $50.?? $40.??" He said, "I DO NOT KNOW...There is no market...None"!! A scary day... A good, short read of history.... The Crash[edit] Before the New York Stock Exchange (NYSE) opened on October 19, 1987, there was pent-up pressure to sell. When the market opened, a large imbalance arose between the volume of sell and buy orders, placing downward pressure on prices. Regulations at the time allowed designated market makers (or "specialists") to delay or suspend trading in a stock if the order imbalance exceeded the specialist's ability to fulfill in an orderly manner.[15] The imbalance on October 19 was so large that 95 stocks on the S&P 500 Index (S&P) opened late, as also did 11 of the 30 DJIA stocks.[16] Importantly, however, the futures market opened on time across the board, with heavy selling.[16] On that Monday, the DJIA fell 508 points (22.6 percent), accompanied by crashes in the futures exchanges and options markets;[17] the largest one-day percentage drop in the history of the DJIA.[18] Significant selling created steep price declines throughout the day, particularly during the last 90 minutes of trading.[19] Deluged with sell orders, many stocks on the NYSE faced trading halts and delays. Of the 2,257 NYSE-listed stocks, there were 195 trading delays and halts that day.[20] Total trading volume was so large that the computer and communications systems were overwhelmed, leaving orders unfilled for an hour or more. Large funds transfers were delayed and the Fedwire and NYSE SuperDot systems shut down for extended periods further compounding traders' confusion.[21] Margin calls and liquidity[edit] Frederic Mishkin suggested that the greatest economic danger was not events on the day of the crash itself, but the potential for "spreading collapse of securities firms" if an extended liquidity crisis in the securities industry began to threaten the solvency and viability of brokerage houses and specialists. This possibility first loomed on the day after the crash.[22] At least initially, there was a very real risk that these institutions could fail.[23] If that happened, spillover effects could sweep over the entire financial system, with negative consequences for the real economy as a whole.[24] As Robert R. Glauber stated, "From our perspective on the Brady Commission, Black Monday may have been frightening, but it was the capital-liquidity problem on Tuesday that was horrifying."[25] The source of these liquidity problems was a general increase in margin calls; after the market's plunge, these were about ten times their average size and three times greater than the highest previous levels.[26] Several firms had insufficient cash in customers' accounts (that is, they were "undersegregated"). Firms drawing funds from their own capital to meet the shortfall sometimes became undercapitalized; 11 firms received margin calls for a single customer that exceeded that firm's adjusted net capital, sometimes by as much as two-to-one.[23] Investors needed to repay end-of-day margin calls made on October 19 before the opening of the market on October 20. Clearinghouse member firms called on lending institutions to extend credit to cover these sudden and unexpected charges, but the brokerages requesting additional credit began to exceed their credit limit. Banks were also worried about increasing their involvement and exposure to a chaotic market.[27] The size and urgency of the demands for credit placed upon banks was unprecedented.[28] In general, counterparty risk increased as the creditworthiness of counterparties and the value of collateral posted became highly uncertain.[29] Federal Reserve response[edit] "[T]he response of monetary policy to the crash," according to economist Michael Mussa, "was massive, immediate and appropriate."[30] One day after the crash, the Federal Reserve (Fed) began to act as the lender of last resort to counter the crisis.[31] Its crisis management approach included issuing a terse, decisive public pronouncement; supplying liquidity through open market operations;[32] persuading banks to lend to securities firms; and in a few specific cases, direct action tailored to a few firms' needs.[34] On the morning of October 20, Fed Chairman Alan Greenspan made a brief statement: "The Federal Reserve, consistent with its responsibilities as the Nation's central bank, affirmed today its readiness to serve as a source of liquidity to support the economic and financial system".[35] Fed sources suggested that the brevity was deliberate, in order to avoid misinterpretations.[32] This "extraordinary"[36] announcement probably had a calming effect on markets[37] that were facing an equally unprecedented demand for liquidity[28] and the immediate potential for a liquidity crisis.[38] The market rallied after that announcement, gaining around 200 points, but the rally was short-lived. By noon the gains had been erased and the slide had resumed.[39] The Fed then acted to provide market liquidity and prevent the crisis from expanding into other markets. It immediately began injecting its reserves into the financial system via purchases on the open market. On October 20 it injected $17 billion into the banking system through the open market – an amount that was more than 25 percent of bank reserve balances and 7 percent of the monetary base of the entire nation.[40] This rapidly pushed the federal funds rate down by 0.5 percent. The Fed continued its expansive open market purchases of securities for weeks. The Fed also repeatedly began these interventions an hour before the regularly scheduled time, notifying dealers of the schedule change on the evening beforehand. This was all done in a very high-profile and public manner, similar to Greenspan's initial announcement, to restore market confidence that liquidity was forthcoming.[41] Although the Fed's holdings expanded appreciably over time, the speed of expansion was not excessive.[42] Moreover, the Fed later disposed of these holdings so that its long-term policy goals would not be adversely affected.[32] The Fed successfully met the unprecedented demands for credit[43].
When the futures got halted at the Asian open, people (e.g. myself) were bidding up VIX because it's got short delta and you can pre-position for when the futures re-open lol. Pandemic trading was kinda fun. 9/11 trading definitely was not fun.
I think the flash crash of may 2010 really got the attention of the exchanges,SEC,Congress,etc. That's when they realized they better get a serious circuit breaker system in place.
I remember on these boards (ET), we had people who owned oil futures during the pandemic. They may have had them on margin!! They got very mad here...Then very quiet.