Markets , Currencies , Foreign Exchange

A Short History of Sudden Market Moves

Markets are no strangers to sharp movements, extreme volatility
By Max Colchester and Alistair MacDonald
Updated Oct. 7, 2016 1:58 p.m.

The British pound sunk against the dollar in volatile early trading on Friday.
Market watchers said the sudden drop may have been caused by a so-
called fat-finger trade or have been the result of accelerated computerized
trades amid concerns over the U.K.s exit from the European Union.
Financial markets are no strangers to sudden movements and extreme
volatility that at first seem unexplained. Here are a few recent sharp
examples, from currencies to commodities.

July 2016
The dollar dropped a sudden 1% against the yen in early Asia trade. That
was blamed on a fat-finger trade that had caused stop-loss orders amid
the thin liquidity of early trading hours.

June 2016
The British pound soared more than 1% against the U.S. dollar in Asian
trading, due to a suspected trader error. The sudden drop pointed to
investors nerves ahead of that months U.K.s referendum on its EU
membership.

May 2016
The yuan embarked on a mini flash crash following the release of Federal
Reserve minutes that signaled coming rate increases. The Chinese
currency momentarily traded at its weakest level since February.

August 2015
The Dow Jones Industrial Average tumbled more than 1000 points in the
first few minutes of trading on Aug. 24, 2015, in part as early losses
triggered by stop-loss orders.
May 2015
German government debt staged a sudden and sharp selloff before
recovering, unnerving investors because so-called bunds are widely
viewed as ultrasafe and nobody could pinpoint a single factor driving the
move. The Bank for International Settlements said trading algorithms may
have played a role.

March 2015
The dollar slid 3% in the space of four minutes against the euro before
quickly recovering. The wild ride came after the Fed hinted that it wasnt
going to raise short-term interest rates as expected.

October 2014
The yield on the 10-year Treasury note took a sharp dive below 2% within
minutes, confusing markets. U.S. officials later cited broad changes in the
structure of Treasury markets for the sudden move, including the growing
role of high-speed trading.

April 2012
Traders mainly blamed a fat finger for a sudden $1.24 billion sale of gold
futures that slashed gold prices by $15.

May 2011
Traders blamed automation for an 8.6% fall in U.S. oil futures, the biggest
single-day price decline in more than two years. An initial bout of selling
on the back of disappointing weekly U.S. jobs data and a stronger dollar,
became a rout as the falls triggered automated sell orders.

March 2011
Prices in the tiny cocoa-futures market dropped 13% in just seconds on the
Intercontinental Exchange Inc. before rebounding almost as quickly.

May 2010
One of the most famous examples of a flash crash happened when U.S.
stocks suddenly collapsed in their biggest and most rapid fall ever, with
the Dow Jones Industrial Average dropping 1,000 points in a matter of
minutes.
May 1962
Before the era of computer-based trading, many U.S. stocks sold off at
once around 2:48 p.m. on May 29, 1962, with blue chips like International
Business Machines Corp. plummeting sharply without notice. The
suddenness of the selloff looked a lot like the immediate moves of the
modern era, and many trades were executed at vastly different prices
than they had been trading at just instances earlier. The event, which
followed a period of very big gains for the market, stepped up pressure on
regulators to deal with procedures for trading.