An unusual human error in Chicago caused chaos on the New York Stock Exchange that affected more than 250 companies

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An employee failed to properly shut down the disaster recovery system, triggering wild swings in the market

An unusual human error in Chicago caused chaos in The New York Stock Exchange affected more than 250 companies

Stock image of traders working at the New York Stock Exchange (REUTERS/Andrew Kelly)

In < b>Chicago, more than a thousand kilometers from Wall Street , the data backup center of the New York Stock Exchange (NYSE, for its acronym in English) must be ready at all hours in the event of a disaster in the world's largest stock market.

When the markets close, the routine is for NYSE staff to turn the systems on and off to make sure everything is working. But on Tuesday, an employee failed to properly shut down the disaster recovery systemand this caused… a disaster.

That human error, described by people with direct knowledge of the internal operations of the NYSE, is what triggered wild swings in the market when the opened trading Tuesday morning in Manhattan. The chaos affected more than 250 companies, including Wells Fargo, McDonald's, Walmart and Morgan Stanley, and in some cases caused stock prices to swing 25 percentage points in a matter of minutes.

The episode has led the stock market to cancel thousands of trades at a cost that has yet to be determined. Meanwhile, there is nervousness among market professionals and traders, awaiting more details from the exchange on what it publicly called a “manual error” related to its “disaster recovery setup”.

Unusual human error in Chicago caused chaos on the New York Stock Exchange, affecting more than 250 companies

FILE PHOTO: The Wall Street entrance to the New York Stock Exchange (REUTERS/Brendan McDermid/File Photo)

“They're going to have to come up with a better explanation” to reassure investors and regulators, said Joseph Saluzzi, a partner and co-founder of Themis Trading LLC, whose firm managed to avoid losses. “Even though systems fail, and we understand that, there is zero tolerance when it comes to market opening and closing.”

In simpler terms, according to one person, the Confusion was due tothe backup system in Chicago was left on. That tricked the exchange's computers into assimilating the 9:30 a.m. opening bell. as a continuation of the negotiation. Therefore, they ignored the opening auctions of the day that clearly set the initial prices.

Without that routine step, offers with all kinds of prices arrived. That quickly activated mechanisms designed to prevent aggressive market swings, setting off alarm bells on trading screens everywhere.

NYSE executives spent hours trying to identify the problem until they were certain there would be no further consequences, said the people, who spoke on condition of anonymity. Officials also began reviewing whether trades could be labeled “clearly wrong” under market rules and then cancelled. Shortly before 3 p.m. on Tuesday, the stock market announced it would reverse the most extreme trades.

(With information from Bloomberg)

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