[LINK] Financial cyberspaces, and flash crashes

[Roger Clarke]

At 17:02 +0000 17/2/12, stephen at melbpc.org.au wrote:
>  ... [oooh-aaah article on program-trading] ...

I hope the rest of it is more accurate than this bit:
>But in 1998, after the U.S. Securities and Exchange Commission authorized
>the first electronic exchanges, computer trading programs entered markets
>as equals to humans.

NASDAQ started in 1971, although its initial services wouldn't have 
supported online trading suitable for bots to participate in.

The LSX, as it was then, Lond Stock Exchange, went fully online in 1986.

The ASX (Australian) introduced the fully online trading system SEATS 
in 1987, and the trading floors were closed in 1990.


Apart from that, I couldn't understand from the article how sellers 
could react fearfully in the millisecond timescale, in order to put 
in sell orders with successively lower prices on them, such that the 
sale-prices could spiral down so rapidly.

Are there really stop-loss orders in place for such large volumes of 
stocks that small price-drops can trigger bandwagon effects?  If so, 
that's what needs to be focussed on as the underlying feature, with 
speed of execution playing a bit-part (so to speak) in the fracas.


-- 
Roger Clarke                                 http://www.rogerclarke.com/
			            
Xamax Consultancy Pty Ltd      78 Sidaway St, Chapman ACT 2611 AUSTRALIA
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Visiting Professor in the Faculty of Law               University of NSW
Visiting Professor in Computer Science    Australian National University