"I was a broker for Blinder Robinson when that occurred.
The main culprit was computer trading. The market took a quick dip for whatever reason, but the institutional traders had just set up their software to protect their portfolios. Software trading was still relatively new and the institutions took a chop and slash attitude toward protecting their portfolios."
Thanks for post. It is easy to see how this could happen if sell algorithm was the similar for many institutions.
if( market falls below x day simple moving average )
{
sell
}
if( market falls below y day exponential moving average )
{
sell
}
That's about it. All the institutional computers were kicking in with the same set of parameters at lightning speed. It was caos.
As I remember it, the NASDAQ didn't get hit nearly as bad, but NASDAQ was a whole lot more computer savvy than New York.
The New York exchange resisted moving to computers for the longest time. Old fogeyism at its finest. After the bloodbath, they had a whole new attitude.