The greatest systemic danger of 1987 came after the crash, from the clearinghouse’s solvency.

Evidence

Although it was the price falls on Monday October 19, 1987 that hit the headlines, the hours of greatest systemic danger came that night and on Tuesday morning. The events with which I began this book were not public knowledge at the time, but enough leaked out for “rumors about the financial viability” of the Mercantile Exchange’s clearinghouse to sweep the markets on the Tuesday morning (Brady Commission 1988, p. 40). Since the clearinghouse stood behind all the billions of dollars of futures traded by the Mere, it was a central part of the financial infrastructure of the United States, and the possibility of its failure was a source of deep alarm. — Donald MacKenzie, An Engine, Not a Camera, 833

Categorization

• XREF: 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; Market infrastructure itself failed under the 1987 crash’s order flow — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 820 (+2 more)

Broader Connections

• Market infrastructure itself failed under the 1987 crash’s order flow #complicates (0.82) — Donald MacKenzie, An Engine, Not a Camera, 820