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Report of the Presidential Task Force on Market Mechanisms (The Brady Report)

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The Report of the Presidential Task Force on Market Mechanisms, commonly known as The Brady Report, provides a thorough analysis of the events leading up to and during the stock market crash of October 19, 1987. The task force, headed by Nicholas F. Brady, was appointed by President Ronald Reagan to examine the causes of the crash and make recommendations to prevent future market disruptions.

The report delves into the complexities of the financial markets and the various factors that contributed to the crash, including the role of technology, government regulations, and the behavior of market participants. It highlights the need for improved coordination among regulatory agencies, enhanced risk management practices, and better communication between market participants.

One of the key strengths of the report is its clear and concise presentation of complex financial concepts, making it accessible to readers of all backgrounds. The recommendations put forth by the task force are well-reasoned and practical, serving as a roadmap for policymakers and market participants alike.

Overall, The Brady Report is a comprehensive and insightful examination of the 1987 stock market crash and a valuable resource for those seeking to understand the workings of modern financial markets. It serves as a reminder of the importance of constant vigilance and regulatory reform in maintaining the stability and integrity of the financial system.

Book Description:
From the close of trading on Tuesday, October 13, 1987, to the close of trading on October 19, 1987, the Dow Jones Industrial Average fell 769 points or 31 percent. On October 19, 1987, alone, the Dow fell by 508 points or 22.6 percent. Since the early 1920's, only the drop of 12.8 percent in the Dow on October 28, 1929 and the fall of 11.7 percent the following day, which together constituted the Crash of 1929, approached the October 19 decline in magnitude. The events of October demonstrated an unusual frailty in the markets. Only 3 percent of the total shares of publicly traded stock in the U.S. changed hands during this period, but it resulted in the loss in stock value of $1 trillion .

That such a relatively small transaction volume could produce such a large loss in value over such a short time span led to the rapid appointment of the Presidential Commission on Market Mechanisms by Ronald Reagan. The report of the task force, chaired by Treasury Secretary Nicholas Brady and completed in a few months, focused on the individual marketplaces and the interrelationship of existing market mechanisms, including the instruments traded, the strategies employed, regulatory structures, and electronic market information systems. The resulting publication came to be known as “The Brady Report” and it led to significant public policy regulating securities and other financial instruments during a period of broad technological change in society.


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