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When SVB Financial Group-owned Silicon Valley Bank collapsed on March 10, it set in motion a fear that reverberated throughout the financial sector.
In a recent interview with Business Insider, Peter Tuchman, a veteran trader with about 38 years of experience at the New York Stock Exchange, recounted the chaos that took place.
What Happened: Tuchman, who refers to the exchange as the “delta of all information” and the “ultimate pricing mechanism” for the world’s markets, told the publication that, on the morning of March 10, investors and news outlets were calling him more than usual. Some of the questions hedge funds, large institutions, wealthy individuals investors and customers posed to him included:
"It's important that within the world of liquidity and volatility that there's a human being at the point of execution, making decisions, not a machine, not a robot, not an algo," Tuchman explained.
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Volatility Spikes: Tuchman also underlined the extreme volatility in the markets over the last few years.
"Things that could take generations to happen can now happen between lunch and coffee break," he told Business Insider. “We can be in a bear market at 11 in the morning, and by three o'clock we're in a bull market."
On the day SVB collapsed, Tuchman — who has traded through the stock market crash of 1987, the dot-com bubble burst of 2000, the financial crisis of 2008 and the COVID-19 sell-off of 2020 — said he didn't have lunch at all. He told the publication that when multiple stocks halted trading all at once, he sensed that something serious would happen. Known as the “limit up, limit down” mechanism, this pause in trading gave everyone a chance to decide what they wanted to do since "nobody is advantaged from stocks going up 30 points and down 40 points," the trader said.
“It gives everyone a minute to calm down, see where the bodies are buried, and then make a decision going forward," he added.
Tuchman said that he realized that the market was selling off some contagion stocks radically, as he is used to trading a lot in these types of stocks. He said he watches what’s going on every second on the thousands of monitors that cram trading floors.
He also noted that, following SVB's downfall, many traders went away for the weekend with uncertainty lingering in the air.
“Markets don't like unknowns and anxiety," Tuchman said. "We didn't know a lot more than we knew. That's when you have fear in the market and that's why we had the massive sell-off on Friday."
"I call it a perfect storm," he added. "You've got a lack of information and transparency and clarity. You've got a weekend coming up. You've got a looming Fed meeting. You've got the world trying to come out of a pandemic. You've got a massive interest rate raising environment. You've got a tech sector under fire. You've got retail sales here. All eyes are on the market."
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