My highlights on why quant HFT computer trading caused the last major stock market crash

(Last Updated On: August 12, 2010)

My highlights on why HFT computer trading caused the last major stock market crash
These are quotes from:
http://www.marketwatch.com/story/high-speed-trading-led-to-flash-crash-survey-2010-08-10?reflink=MW_news_stmp&goback=.gde_2107793_member_26888252ember_26888252

Here we go:
More than 80% of advisers said use of computer systems and high-frequency trading contributed to the May 6 volatility, according to a poll of 380 U.S. retail advisers published Monday.
But more than 80% of advisers said their accounts were minimally impacted and did not see ETF or stock-trade reversals, according to iShares’ survey. In fact, 54% said ETFs were still the top investment product to use in volatile market, followed by bonds and mutual funds

The Securities and Exchange Commission on June 10 approved new circuit-breaker rules to prevent another crash, which halts trading of certain stocks if prices move 10% or more within a 5-minute period

Still, 75% of financial advisers said an event similar to what happened on May 6 is inevitable, and 36% said they expect market volatility to increase

Comments included:
Thing is, … these HFT were supposed to replace floor traders as market makers. In fact HFT gets paid to provide liquidity in the form of rebate from the exchange, which is in addition to profiteering from bid-ask spread. It is no wonder that some of these guys haven’t lost money in several years. So, if HFT is to truly become the market makers, SEC needs to put in a rule that says they can’t shut down their machine and go home if the market condition turns against them.
Time to stop this fractional price trading these computer programs use to cheat investors. That would stop some of their non-sense volume trading as they just can’t trade massive volumes spread over a fraction of a penny.

I have often thought that the real “Skynet” (the computer system that brings down the world) would be a Banking/Finance system gone rogue rather than a Military defense system. looks like we may be well on our way to “May 6, 2010 was the day that CashNet became aware”

NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!
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About caustic

Hi i there My name is Bryan Downing. I am part of a company called QuantLabs.Net This is specifically a company with a high profile blog about technology, trading, financial, investment, quant, etc. It posts things on how to do job interviews with large companies like Morgan Stanley, Bloomberg, Citibank, and IBM. It also posts different unique tips and tricks on Java, C++, or C programming. It posts about different techniques in learning about Matlab and building models or strategies. There is a lot here if you are into venturing into the financial world like quant or technical analysis. It also discusses the future generation of trading and programming Specialties: C++, Java, C#, Matlab, quant, models, strategies, technical analysis, linux, windows P.S. I have been known to be the worst typist. Do not be offended by it as I like to bang stuff out and put priorty of what I do over typing. Maybe one day I can get a full time copy editor to help out. Do note I prefer videos as they are much easier to produce so check out my many video at youtube.com/quantlabs