Legacy systems designed for normal price ranges fail catastrophically in extreme markets.

Evidence

Option prices rose to levels that defeated the nascent automated systems, many of which could cope only with double-digit dollar prices. When option prices rose to 106, "it appeared on your sheets as ... 6… So your account [with the clearing firm] was off by $20 million the next day… Nobody knew where they stood.” — Donald MacKenzie, An Engine, Not a Camera, 918

Categorization

• SHARE: A sharp illustration of infrastructure breaking at the boundary of its design assumptions — worth sending to anyone who works on trading systems or financial ops.
• XREF: connects to: Currency pegs fail when markets can bet against limited reserves and force devaluation. — Mark Blyth, Austerity: The History of a Dangerous…, 213; The 1987 crash exposed how fragile the options clearing system was to extreme prices. — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 164; Market infrastructure itself failed under the 1987 crash’s order flow — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 820

Broader Connections

• The 1987 crash exposed how fragile the options clearing system was to extreme prices. #exemplifies (0.92) — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 164
• Market infrastructure itself failed under the 1987 crash’s order flow #exemplifies (0.90) — Donald MacKenzie, An Engine, Not a Camera, 820