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Boo BearWhy did the NYSE trading floor erupt with boos after the crash?

By Christopher Beam
Posted Wednesday, Feb. 28, 2007, at 6:53 PM ET

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Illustration by Mark Alan Stamaty. Click image to expand.

Tuesday's stock market crash drove the Dow Jones Industrial Average down 416 points in the steepest one-day decline since Sept. 11, 2001. At the end of the day, the New York Times reported, the trading floor of the New York Stock Exchange "erupted with hearty boos." Wait, don't brokers make money whether or not the market does well?

Yes, but they certainly have a stake in its success. Brokers do earn money from commissions regardless of the market's performance. (Many traders, on the other hand, are just playing the market for themselves.) So while Tuesday's crash was bad news for anyone investing money in the market, the huge volume of transactions—more than 2.4 billion shares were traded Tuesday, compared with an average of about 1.8 billion—presumably meant brokers were making more money than usual just by executing trades.

Then why all the booing? Apparently it was the last day of one of the exchange's executive vice presidents, Anne Allen, and some of the people on the floor were giving her a ribbing. (We hear there was applause as well.) That said, traders might have booed because of a glitch in the Dow Jones computer system that created a minor panic in the middle of the day.

But some brokers may have had a good reason to boo, especially those working as "market makers." Instead of matching buyers with sellers immediately, market makers sometimes buy stocks with the intent of selling them back later, be it in a few minutes or a few weeks. If, at the end of the day, a broker is "net long"—or, has bought more stocks than he sold—then a 3 percent drop in the market would be painful. Not to mention, many brokers choose to invest in the markets, making the crash as agonizing for them as for anyone else.

Bonus Explainer: After the Dow Jones' initial drop Tuesday afternoon, the New York Stock Exchange implemented "trading curbs." What are those? Also called "circuit breakers," these are restrictions designed to keep people from trading large blocks of shares that might further destabilize the market. Curbs go into effect whenever the exchange's composite index rises or sinks 150 points beyond the previous day's closing price. During that time, "program trades"—defined by the NYSE as "the purchase or sale of 15 or more stocks having a total market value of $1 million or more"—are off limits. (You'll also see a little "Curbs In" icon at the bottom of the screen on CNBC.) The NYSE started imposing curbs after the "Black Monday" stock market crash of 1987, which many people blamed on program trading.

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Christopher Beam is a Slate political reporter.
Illustration by Mark Alan Stamaty.
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