Both the CME and ICE trading systems, have multiple market protection mechanisms which would make this impossible. Both reject orders placed outside of a reasonable price range and limit the number of contracts one can trade per given transaction. CME also has a “Stop Spike Functionality” which prevents against a cascade of stop orders from triggering a precipitous collapse. Lastly, every time a trade is entered a “Review Order” screen pops up that repeats your desired trade and basically asks – are you sure you want to do this? The “Fat Finger” theory doesn’t hold water. What does hold water, however, is the removal of a long standing SEC rule designed to protect against short sellers driving a stock into the ground – The Uptick Rule.
The Uptick Rule (SEC Rule 10a-1) went into effect in 1938, following a crash in the previous year. The rule is quite simple – Short sellers can only short a stock after an “up tick” (increase) in price. This mechanism, which remained in effect until July 2007 , prevented free fall stock prices for nearly 70 years. Months after the removal of the uptick rule, stock prices plummeted in a manner which was reminiscent of crashes experienced 70 years earlier.
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