Robinhood Outage Unrelated to Global Market Rout, Blue Ocean Claims

Key Takeaways

• Global stock markets had their worst day in years on Monday.
• Asian markets were among the worst affected.
• Amid the volatility, Robinhood suspended its 24-hour trading service.
• Blue Ocean CEO Brian Hyndman blamed a technical failure for the downtime.

With stock markets worldwide in freefall, major indices in America, Asia, and Europe witnessed their worst day in years on Monday, Aug. 5.

Amid chaotic scenes in equities and crypto markets, Robinhood temporarily suspended its 24-hour trading service, blaming a technology issue for the downtime.

Robinhood Trading Halt

As markets around the world crashed on Monday morning, Robinhood suspended its 24-hour trading service. Crypto and securities trades within regular market hours, however, remained unaffected by the suspension.

In an update  on its website, Robinhood said the suspension was due to controls built into the Blue Ocean Alternative Trading Systems (BOATS). 

BOATS is a risk control system that prevents stocks from trading more than 20% above or below the price set toward the end of extended trading hours.

Blue Ocean Buckles Under Trading Volume

Responding to the halt on social media, disgruntled users accused Robinhood of leaving them up the creek without a paddle. Others speculated that the move was an intentional attempt to calm the market.

However, in comments  to the media on Tuesday, Blue Ocean CEO Brian Hyndman denied that the outage was orchestrated on purpose. Rather, he said BOATS was overwhelmed by the volume of transactions. “[Robinhood] didn’t ask us to go down. There’s no direct relationship there where they were trying to dampen volatility. This is really Blue Ocean just having an overall capacity issue,” he claimed.

“Our platform is scaled to handle roughly about 50 million different messages on any given night […] so we got to that point, and on the database side, it ended up failing.” Noting that 80% of the data processed by Blue Ocean is for trades originating in Asia, he added: “There was a bit of a global meltdown, right? I think the Japanese markets were down in double digits. It was just extreme volume.”

Financial Markets Collapse

Between poor US employment data  and the Bank of Japan’s decision to raise interest rates  last week, Monday’s market action culminated in an economic storm that has been brewing for weeks. 

Major indices from Wall Street to London kicked off the business week with over 2% drops.

The FTSE 100 suffered its biggest single-day drop in over a year, declining 2.3% at the time of writing. Things weren’t much better in the US, with the S&P 500 and the Dow Jones Industrial Average slipping 1.8% and 1.51%, respectively.

However, the worst losses have been recorded in Asia.

In response to the BoJ’s rate hike, the Nikkei 225 index tanked by more than 12% in its biggest single fall since the Black Monday crash of 1987. Meanwhile, South Korea’s Kospi closed the trading day 8.8% lower than it started.

Market panic has also spilled into the crypto sphere, with many other crypto assets plummeting by double digits.

Crypto Bloodbath

At one point on Monday, the total cryptocurrency market capitalization was down 15.7% in 24 hours. The two foremost crypto assets, Bitcoin and Ethereum, experienced greater declines. Since Sunday, Bitcoin fell over 26% and Ether 33%.

Amid signs that major trading firms could be in trouble, the latest route echoes past black swan events like the FTX collapse and the Terra-Luna crisis. 

About the Author

James Morales

Although his background is in crypto and FinTech news, these days, James likes to roam across CCN’s editorial breadth, focusing mostly on digital technology. Having always been fascinated by the latest innovations, he uses his platform as a journalist to explore how new technologies work, why they matter and how they might shape our future.

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