breezyhill
Veteran Member
firsthand account of tuesday, oct 20, 1987, from a thread on TF.
i don't understand all of the references, but it explains about the ppt and how it came about.
the paragraphs were kind of long, so i broke them into smaller paragraphs.
my question is, after reading this, could it be that our financial market was set for a major correction in 1987, and that the ppt has managed to manipulate the market for 21 years?? and, if the market had been allowed to self-correct, would we be in the same dire situation financially that we are now?
anyway, it's a very interesting read.
===============================
QUOTE: """Were you by any chance standing in the MMI pit on Tuesday, October 20, 1987? If you were, I would like to hear your take on the very strange event that happened that day. You know what I am talking about if you were there.
I myself was a MM on the CBOE floor. Even though I was a CBOT exerciser, I was never able to find anyone who was there and would talk about it.
Afterwards it seemed like most people didn't want to delve into the details, like willful amnesia, as the implications were so grave. It might have some bearing on current events.
P.S. You alluded to Ben shitting in his pants. You could tell the board what the "smell of fear" is, in the context of pit trading.""
QUOTE: """Before I tell the the story, let me say that I am extremely skeptical about conspiracy and tinfoil theories of all kinds, prefering the Occam's razor principle, and that human greed and stupidity, or chance, are usually more than adequate explanations for many events.
I do not believe, or at least want to believe, that a Plunge Protection Team (PPT) arm of the government actively intervenes via actual buys and sells in equity markets. But my own experience leads me to have a shadow of doubt.
That said, the below story, whatever the underlying truth of the situation, is I believe the origin of the PPT legend.
Tuesday October 20, 1987 was the day after the Black Monday crash of 1987 when the Dow lost 22.6%, the biggest one-day percentage loss in history.
After the then-record volume and tumult of the previous day, Tuesday opened on a very uneasy and tentative note.
In the OEX pit, representatives of George Soros, belying his reputation as a master trader, executed a huge "sell everything /help let me out" trade at unfavorable prices only to see the market quickly turn positive.
Many other traders did likewise, especially institutions that engaged in large-scale portfolio insurance strategies.
This rally gained steam in the morning and became, like most Bear market rallies, vicious. Then, having punished the shorts, the market hesitated and turned south.
Soon the situation was reversed and the market was poised to test the lows of the previous day, but with even more palpable panic in the air.
The tape was running so late no one knew what the prices outside their own trading post really were.
Then, I watched in amazement as I saw the inconceivable: one by one, the bids of many big-cap stocks simply disappeared -- there was only an ask price, and no bid at all at any price.
Rumors and conflicting reports about imminent closure of one or more of the key exchanges flew back and forth the floor.
Finally, it was official: The Chicago Merc-- where the SPUs were traded, key hedging vehicles for CBOE Market-Makers -- had closed, and the closure of the NYSE was imminent, because trading had literally stopped.
What I can still recall as if it were yesterday is this: suddenly, after the extreme noise just minutes before, the floor became deathly quiet.
It is difficult to convey the fear, the wonder and the amazement of the moment. I don't recall if the CBOE and NYSE had officially closed trading, but that was immaterial: No actual trading was occurring, the markets had literally collapsed.
Here is where the legend began: The Chicago Board of Trade had a fairly new stock index futures product, the MMI, containing 20 of the bluest blue-chip stocks, intended to roughly replicate the performance of the Dow. It was very thinly traded up to that day.
All of a sudden, out of nowhere, 100 MMI contracts traded, a size trade in the circumstances. Whoever the parties to the trade were, the seller now had a incentive to hedge the sale with stock purchases, and bids in those 20 underlying stocks appeared. The market, like a cardiac patient shocked by the paddles, came back to life.
The question is who at the time, when it truly looked like the end of the trading world, had the capital and cajones to step up to the plate for a hundo of those contracts.
There was some hushed discussion of this on the floor, but as I alluded in my original post, it seemed that in the end no one wanted to ask too many questions. At the time, if there was some direct activity by a government agency, it would have have been illegal.
Here is the Wikipedia article of the 87 crash, which does not mention this incident:
http://en.wikipedia.org/wiki/Black_Monda....
http://www.tickerforum.org/cgi-ticker/akcs-www?post=65800&findnew#new
==========================
wow. i can only imagine what the traders feel like on the floor the past few days.
breezyhill
i don't understand all of the references, but it explains about the ppt and how it came about.
the paragraphs were kind of long, so i broke them into smaller paragraphs.
my question is, after reading this, could it be that our financial market was set for a major correction in 1987, and that the ppt has managed to manipulate the market for 21 years?? and, if the market had been allowed to self-correct, would we be in the same dire situation financially that we are now?
anyway, it's a very interesting read.
===============================
QUOTE: """Were you by any chance standing in the MMI pit on Tuesday, October 20, 1987? If you were, I would like to hear your take on the very strange event that happened that day. You know what I am talking about if you were there.
I myself was a MM on the CBOE floor. Even though I was a CBOT exerciser, I was never able to find anyone who was there and would talk about it.
Afterwards it seemed like most people didn't want to delve into the details, like willful amnesia, as the implications were so grave. It might have some bearing on current events.
P.S. You alluded to Ben shitting in his pants. You could tell the board what the "smell of fear" is, in the context of pit trading.""
QUOTE: """Before I tell the the story, let me say that I am extremely skeptical about conspiracy and tinfoil theories of all kinds, prefering the Occam's razor principle, and that human greed and stupidity, or chance, are usually more than adequate explanations for many events.
I do not believe, or at least want to believe, that a Plunge Protection Team (PPT) arm of the government actively intervenes via actual buys and sells in equity markets. But my own experience leads me to have a shadow of doubt.
That said, the below story, whatever the underlying truth of the situation, is I believe the origin of the PPT legend.
Tuesday October 20, 1987 was the day after the Black Monday crash of 1987 when the Dow lost 22.6%, the biggest one-day percentage loss in history.
After the then-record volume and tumult of the previous day, Tuesday opened on a very uneasy and tentative note.
In the OEX pit, representatives of George Soros, belying his reputation as a master trader, executed a huge "sell everything /help let me out" trade at unfavorable prices only to see the market quickly turn positive.
Many other traders did likewise, especially institutions that engaged in large-scale portfolio insurance strategies.
This rally gained steam in the morning and became, like most Bear market rallies, vicious. Then, having punished the shorts, the market hesitated and turned south.
Soon the situation was reversed and the market was poised to test the lows of the previous day, but with even more palpable panic in the air.
The tape was running so late no one knew what the prices outside their own trading post really were.
Then, I watched in amazement as I saw the inconceivable: one by one, the bids of many big-cap stocks simply disappeared -- there was only an ask price, and no bid at all at any price.
Rumors and conflicting reports about imminent closure of one or more of the key exchanges flew back and forth the floor.
Finally, it was official: The Chicago Merc-- where the SPUs were traded, key hedging vehicles for CBOE Market-Makers -- had closed, and the closure of the NYSE was imminent, because trading had literally stopped.
What I can still recall as if it were yesterday is this: suddenly, after the extreme noise just minutes before, the floor became deathly quiet.
It is difficult to convey the fear, the wonder and the amazement of the moment. I don't recall if the CBOE and NYSE had officially closed trading, but that was immaterial: No actual trading was occurring, the markets had literally collapsed.
Here is where the legend began: The Chicago Board of Trade had a fairly new stock index futures product, the MMI, containing 20 of the bluest blue-chip stocks, intended to roughly replicate the performance of the Dow. It was very thinly traded up to that day.
All of a sudden, out of nowhere, 100 MMI contracts traded, a size trade in the circumstances. Whoever the parties to the trade were, the seller now had a incentive to hedge the sale with stock purchases, and bids in those 20 underlying stocks appeared. The market, like a cardiac patient shocked by the paddles, came back to life.
The question is who at the time, when it truly looked like the end of the trading world, had the capital and cajones to step up to the plate for a hundo of those contracts.
There was some hushed discussion of this on the floor, but as I alluded in my original post, it seemed that in the end no one wanted to ask too many questions. At the time, if there was some direct activity by a government agency, it would have have been illegal.
Here is the Wikipedia article of the 87 crash, which does not mention this incident:
http://en.wikipedia.org/wiki/Black_Monda....
http://www.tickerforum.org/cgi-ticker/akcs-www?post=65800&findnew#new
==========================
wow. i can only imagine what the traders feel like on the floor the past few days.
breezyhill