Market infrastructure itself failed under the 1987 crash’s order flow

Evidence

As alarming as the size of the crash were the breakdowns in markets that accompanied it. The printers at the specialists’ booths on the New York Stock Exchange could not keep up with the waves of sell orders arriving through the semi-automated DOT (Designated Order Turnaround) system, and there were also serious network delays and software problems (Brady Commission 1988, pp. 48 and VI-47). — Donald MacKenzie, An Engine, Not a Camera, 820

Categorization

• XREF: Connects to broader finance literature on HFT and market microstructure — the 1987 DOT bottlenecks are a precursor to questions about algorithmic trading infrastructure fragility. — connects to: The 1987 crash exposed how fragile the options clearing system was to extreme prices. — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 164; Clearinghouse settlement failure alone could have triggered a cascade of 1987 bankruptcies; The 1987 crash permanently broke Black-Scholes fit with market prices — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 150 (+5 more)

Broader Connections

• The 1987 crash exposed limits of arbitrage as a mechanism linking markets #expands (0.85) — Donald MacKenzie, An Engine, Not a Camera, 822
• The 1987 crash taught options markets that unhedged put sales posed systemic risk #expands (0.80) — Donald MacKenzie, An Engine, Not a Camera, 931