It is a wind of panic which blew on Monday morning on the European Stock Exchanges. In a few minutes, the main European index fell ten points before reducing its losses in the trading rooms. Since then, the conjectures have multiplied.
In a few minutes, this Monday morning around 10 a.m., the Bel20 plummeted by more than 5%, before recovering just as quickly. That day, Franck Vranken, chief strategy officer of the Rothschild bank, was in the trading room. He tells us : “We have seen that in a fraction of a minute, or even a few seconds, the market fell by around 7% for Sweden and around 2.5% for the major European indices, before being able to recover. And so in fact, clearly, there was a huge drop from moment to moment that we couldn’t explain. “
What happened then? How do you explain this strange air pocket? In fact, what is called a “flash crash” or “flash crash” in stock market jargon happened. In a trading room, a trader made a handling error. Christophe Clezinsky, partner of B-Trader, a trading room for independent traders, explains to us: “Concretely, this Monday morning, there was a Citibank trader who made a sale, but who apparently got the quantity of futures contracts sold wrong, which obviously caused an earthquake in the markets. We’re talking about 300 billion, which is huge because we are in the context of futures contracts. These are products with very, very high leverage effects.”
Very banally, this human error can be linked to poor manipulation: traders have shortcuts that allow them to enter numbers by pressing a single button. For example, they can enter three “0”s by pressing a button. In one click, they can then sell 10,000 contracts instead of ten…with, as a result, a ball with colossal consequences for certain actors.