NEW YORK — Unprecedented trading volume and bungee-jumping share prices Tuesday taxed stock market computer systems to the limit--and in some cases beyond.
Also taxed were the resources of market professionals trying to execute customer orders amid what at times were near chaotic conditions.
"If things keep going this way, the stress levels will be off the chart," Bob Moore, Smith Barney's chief of Nasdaq trading, said of his 120-person trading desk.
The heads of Nasdaq and the New York Stock Exchange defended the performance of their computer systems under the onslaught of record-shattering volume, but at times the systems did break down.
Hours after the close of trading, for example, the final price for the Nasdaq index was still unknown because the computer that tabulates the index had overloaded and frozen at 3:17 p.m.
And Tuesday morning, there were delays of as long as 90 minutes between when traders entered Nasdaq orders and when they learned at what price the trades had gotten executed.
"We were flying blind for a good portion of the day," Moore said.
Crushing volume was far from his only headache.
On a day when the Dow Jones industrial average dropped almost 190 points in the first 40 minutes, regained 300 points in the next half hour, then dropped 100, then gained 100 back--all before noon--it added up to a nightmare for traders.
Moore, interviewed amid the hubbub of Smith Barney's vast trading floor in downtown Manhattan, gave this example of how such wild price swings can whipsaw traders:
Early in the day, while the Dow was still tumbling, an institutional customer placed an order for 15,000 shares of stock in a small finance company, trading at $39.50.
Smith Barney didn't own the stock, so it had to go looking for some just as the market staged its spectacular morning rebound. By the time the trader had finished filling the order incrementally, the price had reached $48. On a single deal, Moore said, Smith Barney was out $64,700.
"There are going to be days like that," he said.
J. Patrick Campbell, Nasdaq executive vice president for market services, acknowledged that trade confirmations were running late Tuesday but said that orders still were being executed at the proper price.
"On the whole, I think our systems operated admirably," he said, noting that the volume of 1.375 billion shares traded was more than a third greater than Nasdaq's previous record.
Private trading systems that hook up with Nasdaq, such as Instinet, owned by Reuters Holdings, and Bloomberg Tradebook, owned by Bloomberg, also experienced slowdowns, as did the internal computer systems of the stock brokerages.
The New York Stock Exchange, which handled 1.2 billion shares on its first 10-figure trading day, reported few problems, a spokeswoman said.
At the Pacific Exchange, buying activity was furious, with many computer systems running slower than usual and frustrating traders.
Some traders said they were overwhelmed Tuesday morning with a backlog of unfilled customer orders.
"I didn't look at the market for two hours--I had a huge backup problem," said trader Harvey Cloyd.
At the full-service brokerages, it also was tough to keep up with the market. Trading was so furious that brokers couldn't rely on the Quotron machine, the computer device that gives them up-to-the-second stock prices.
"The information is so far behind the market, you can't really rely on the price on the screen," one PaineWebber broker said. "You just have a sense that if you want to own Intel, the market will fill your order."
It wasn't just Quotron that had a lag in keeping brokers up to date, said Bob Crook, a spokesman for Reuters, which owns Quotron.
Bloomberg, Dow Jones Markets and other providers of what is known as real-time information also fell behind, especially in the morning rush, he said.
Stockbroker Craig Reynolds of Van Kasper & Co. in Newport Beach said he had taken orders from clients who more often trade with discount brokers or online, but were unable to place orders in those ways Tuesday because of the heavy volume.
"I guess the Internet stuff is breaking down," Reynolds said. "I had a client who has an Internet account, and he called up and had me place an order because he couldn't get through."
He said the huge trading volume was exacting a toll on him.
"At 1 o'clock I'm going to El Ranchito and have a few margaritas. I'm worn out, spent. I'm an old fat guy--I'm not meant to take this."
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Anatomy of a Recovery
The U.S. stock market rebounded in dramatic fashion Tuesday from Monday's steep dive, with the Dow Jones industrial average soaring 337.17 points, or 4.7%, to 7,498.32 as trading volume rocketed to record levels. Many of the buyers--at least those who could get through to their brokers--favored the tried and true: stocks that had been market leaders before the recent pullback.
A Massive Surge in Volume . . .
10 heaviest trading days on the NYSE, in millions of share:
Jan. 23, 1997: 684.59