[LINK] Financial cyberspaces, and flash crashes

Richard Chirgwin rchirgwin at ozemail.com.au
Sat Feb 18 09:18:35 AEDT 2012

I can't comment on the academic paper, but the Gizmodo article is wrong 
in the headline.

"How the Technology Behind Nanosecond Trading Could Make Markets Go Haywire"

In a nanosecond, light travels about 0.25 mm in a fibre. You can't 
complete a trade if you can't communicate it.

The media's treatment of high-velocity trading is superficial and 
simplistic, and that's a problem because these clowns really can damage 
the "real" economy.


On 18/02/12 8:04 AM, Roger Clarke wrote:
> 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.

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