On Tuesday, with the stock market in turmoil, a local investor decided to bail out, telling his broker at Prudential-Bache Securities in Bethesda to sell 1,500 shares of Statewide Bancorp of New Jersey. The price then was $33.50 a share.
Yesterday, two days later, with the price down to $20 a share, the sell order hadn't been carried out. Prudential-Bache received a "nothing done" report, meaning that the trade had not gone through.
An angry Carole S. Rollinson, manager of the Prudential-Bache office, yesterday blamed the delay on confusion in the over-the-counter market.
"It was not an orderly market." she said.
The failure to carry out the Statewide Bancorp trade was a small but relevant example of upheaval in the routine of stock market transactions caused by the unprecedented trading volumes that began with Monday's panic selling.
The week-long torrent of orders, totaling 2.4 billion shares so far, has swamped the system that supports stock market operations at virtually every level. They have strained the capacity of computers and the strength and patience of the people who handle operations work at the brokerage houses, stock exchanges and clearing houses.
Nowhere has the strain been greater than in the back offices of brokerage firms, where the workload has been translated into long hours, weekend work and the drafting of secretaries and municipal bond personnel to assist in matching buy and sell orders and processing transactions.
The impact of the market's upheaval will be felt there in the next few days as the five-day settlement process comes into play.
Under this rule, buyers and sellers are expected to put up the cash for shares bought or the stock certificates for stock sold, within five days of the trade. The settlement day for last Monday's 600-million share day will occur on Monday.
The strain on the system prompted New York Stock Exchange Chairman John J. Phelan Jr. to announce yesterday that the exchange would close at 2 p.m. today, Monday and Tuesday to allow member firms to catch up on their processing of transactions. The American Stock Exchange and Chicago Board of Options Exchange later made similar announcements.
"We want to allow the system to catch its breath," Phelan said.
"Our volume is up 250 percent," said Leonard V. Haynes, cochief administrative officer at Shearson Lehman Bros. Inc. in New York. Haynes said the crush was causing order executions to run late and an increased number of stock transactions in which the firm was unable to match buyers and sellers.
Haynes said Shearson was trying to cope with the deluge by moving staff members to the operations sections and working, in some cases, to midnight. His staff will be working over the weekend, he said.
At Merrill Lynch & Co. Inc., Howard A. Shallcross, director of operations, said that unmatched trades -- called "exceptions" -- were a key problem. "Under normal circumstances, we would have a couple of hundred exceptions. This week we have a couple of thousand.
"We have a lot of tired people," he said, noting that the longer the deluge lasts, the greater the risk that both computer systems and people will start to fail.
"A key thing is the stamina of the people," he said.
At Merrill, Shallcross said, secretaries and staff members from the municipal bond department have been assigned to help with the back-office work, adding 50 to 100 people into operations work. They, too, will work on the weekend.
Hayes said that if the extraordinary volume were to continue for even two weeks, Wall Street firms would be stretched even thinner.
"We would start to experience severe backlogs" and investors would find it even more difficult to enter orders and and get reports on their orders, he said.
Delays were occurring on the New York Stock Exchange floor because of the lineup of orders at the desk of the specialist who trades specific stocks, said Haynes.
The system for tracking and completing orders was also delayed by even seemingly minor problems such as a trader's inability to read his own handwriting -- requiring him to review the transaction at the end of an exhausting day before sending it along for processing.
At First Boston Corp., managing director James L. Freeman said he expected difficult days ahead with "plenty of breaks" in computer systems. "This has not gone unnoticed by everyone in Washington. I think the exchange knows it and is helping to make things orderly."
The wave of work that engulfed the brokerage houses these last few days is now rolling on toward the organizations that are involved in the process of clearance and settlement, in which trades are verified and money and securities change hands.
Clearance and settlement are vital links in the process of completing a buy or sell order.
Robert Schultz, head of planning and operations at the National Securities Clearing Corp., said that the average workload of 600,000 to 700,000 transactions a day had leaped to 2 million on Monday and was only slightly less on Tuesday. One buy or sell order can involve multiple transactions.
Schultz said that the firm's computers had thus far been able to handle the extra load without incident.
"This is really beyond what was built in in terms of excess capacity," he said, "but so far it has been good." He said he worried that if the high volume were to continue, the firms that feed information to the clearing house would begin to fall behind.
At the depository level, where they house the shares of stock that have been traded, officials were preparing for a surge in the workload. William F. Jaenike, head of operations at the Depository Trust Company, said that on Wednesday night the depository handled 193,000 confirmations of trades, compared with 75,000 on an normal day.
Unlike the 1970s when the market went through a major crush, the depository process is now heavily automated and most transactions will involve computer to computer entries.
Jenike said he expected a heavy increase in all phases of their work, including a 50 percent increase in the 125,000 stock certificates the depository normally takes in each day.
Most investors permit their brokerage firms to hold their stock in "street name" and the shares are essentially stored in computers. However, many small investors prefer to keep hold the stock certificates themselves.
Delays and confusion were reported in the over-the-counter market, or Nasdaq, run by the National Association of Securities Dealers in Washington. Patrick Ryan, chief trader at Johnston, Lemon & Co. Inc., said he had encountered problems with the automatic system for processing orders of under 1,000 shares.
"There was so much volume that the traders were not able to change their prices on companies to reflect where the stock was really trading," he said. Ryan compared it to a late-running tape at the NYSE.
As a result, traders had to try to get each other on the phone to nail down prices but the phones frequently were busy.
Joseph R. Hardiman, president of the NASD, said that Nasdaq normally processes about 2 percent of its volume through the small order execution system -- also called SOES. Hardiman said his figures showed that SOES was operating and handling about the normal percentage of volume.
The NASD warned its 540 member firms after the Monday crunch that they would be held responsible for promptly adjusting the price quotations that were incorrectly displayed, creating what are called "locked markets" where the bid and asked prices are the same.
They also were warned to make certain that their phones were being answered. Douglas F. Parrillo, NASD communications director, said the organization had received a number of complaints about the failure of firms to answer phones and other problems. He said the NASD market surveillance committee would review those complaints.
NASD volume, normally about 180 million a day, ballooned to 223 million Monday, 284 million Tuesday and 288 million Wednesday.
Nasdaq was able to operate without any trading halts.