5 ms·

Computer Trading Is Eyed

8 points by jaxc 16y ago

jrockway 16y ago
"There's no mechanism in the current system to stop an error from crushing a stock," said Dan Mathisson, head of electronic trading at Credit Suisse. Yes there is -- the underlying value of the security. If an algorithm bug pushes a stock to 1 cent a share, someone will probably buy it. And if the share has any value, someone will probably offer 2 cents. And so on. (If nobody buys it, maybe it never really had any value.) Someone will lose money, but they should have tested their software more carefully. What nobody seems to mention is that the market recovered just fine after the accidental sell-off. Sure, it was a down day, but it was going to be anyway.
- jared314 16y ago
  Up or down does not matter. "Something" makes money when the stock moves, and it moved a lot. (Everyone refers to "Someone" in the stock market. Give it up. It is "Something" now.)
pak 16y ago
Whoever figures out a way to controlledly repeat this little freefall will get insanely rich. If you knew the DJIA or ACN were going to take these dives, shorting the market for this period would have made scads of money. It pains me to think that there are firms on Wall Street right now trying to figure out how to cause another 1000-point fluctuation and achieve the above. When so many traders make their money off of volatility, I can't help but imagine that this entire system will careen towards total collapse as the trading and the algorithms get faster and more impossible to regulate.
- jrockway 16y ago
  Or, everyone will just put their money in volatility options: http://www.cboe.com/DelayedQuote/DQBeta.aspx?content=http%3A%2F%2Fdelayedquotes.cboe.com%2Fnew%2Findices%2Fquote.html%3FASSET_CLASS%3DIND%26ID_NOTATION%3D8941863 http://www.cboe.com/DelayedQuote/DQBeta.aspx?content=http%3A... But, keep in mind that when people cause an event like this to go short, people that go long while it's happening will also make money. And, the people taking long positions will create demand for the security, raising the price. The demand will increase as the price decreases (unless the stock is actually worthless), and this has a buffering effect on whatever's causing the short. Now, if you do 9/11 or something to make the market crash, that might work.
  - jared314 16y ago
    Someone would foil your 9/11 scheme, and then you would have to resort to playing high-stakes poker to make up your losses. Add some explosions and you might have a good movie.
- cturner 16y ago
  It pains me to think that there are firms on Wall Street right now trying to figure out how to cause another 1000-point fluctuation and achieve the above What you describe is not a sustainable business model. Not any more than spreading false rumours about companies and shorting them, or insider-trading in jurisdictions where it's outlawed. The guys at the SEC are not stupid. If the regulators had an idea that you were doing this they'd first try to find the evidence and jail you. And if they that doesn't work, they can just sit on you until they find something else - even if it's something they've dug up in an unrelated business unit in your group.
  - jared314 16y ago
    Selling insurance against massive fluctuations would be a sustainable business. You would solve the problem you created and profit both ways.
    - cturner 16y ago
      If there's a high chance of you going to jail each time you do it, that makes it non-sustainable.
      - moe 16y ago
        Let me repeat brisance's question: Any of the directors involved in the mortgage bust served any jail time?
        cturner 16y ago
        Brisance's question wasn't relevant to what I'd said, or this thread, and that's why I didn't respond.
        moe 16y ago
        How is his question not relevant? You claim that there is a significant risk of going to jail for "Selling insurance against massive fluctuations". That's a bit strange because these insurances (CDS) have been sold on a massive scale over the past years and are considered to be one of the main reasons for the crash. I did not hear about anyone going to jail for it, or did I just miss that part?
deleted 16y ago
[deleted]

8 points by jaxc 16y ago

"There's no mechanism in the current system to stop an error from crushing a stock," said Dan Mathisson, head of electronic trading at Credit Suisse. Yes there is -- the underlying value of the security. If an algorithm bug pushes a stock to 1 cent a share, someone will probably buy it. And if the share has any value, someone will probably offer 2 cents. And so on. (If nobody buys it, maybe it never really had any value.) Someone will lose money, but they should have tested their software more carefully. What nobody seems to mention is that the market recovered just fine after the accidental sell-off. Sure, it was a down day, but it was going to be anyway.

jared314 16y ago
Up or down does not matter. "Something" makes money when the stock moves, and it moved a lot. (Everyone refers to "Someone" in the stock market. Give it up. It is "Something" now.)

pak 16y ago

Whoever figures out a way to controlledly repeat this little freefall will get insanely rich. If you knew the DJIA or ACN were going to take these dives, shorting the market for this period would have made scads of money. It pains me to think that there are firms on Wall Street right now trying to figure out how to cause another 1000-point fluctuation and achieve the above. When so many traders make their money off of volatility, I can't help but imagine that this entire system will careen towards total collapse as the trading and the algorithms get faster and more impossible to regulate.

jrockway 16y ago
Or, everyone will just put their money in volatility options: http://www.cboe.com/DelayedQuote/DQBeta.aspx?content=http%3A%2F%2Fdelayedquotes.cboe.com%2Fnew%2Findices%2Fquote.html%3FASSET_CLASS%3DIND%26ID_NOTATION%3D8941863 http://www.cboe.com/DelayedQuote/DQBeta.aspx?content=http%3A... But, keep in mind that when people cause an event like this to go short, people that go long while it's happening will also make money. And, the people taking long positions will create demand for the security, raising the price. The demand will increase as the price decreases (unless the stock is actually worthless), and this has a buffering effect on whatever's causing the short. Now, if you do 9/11 or something to make the market crash, that might work.
- jared314 16y ago
  Someone would foil your 9/11 scheme, and then you would have to resort to playing high-stakes poker to make up your losses. Add some explosions and you might have a good movie.
cturner 16y ago
It pains me to think that there are firms on Wall Street right now trying to figure out how to cause another 1000-point fluctuation and achieve the above What you describe is not a sustainable business model. Not any more than spreading false rumours about companies and shorting them, or insider-trading in jurisdictions where it's outlawed. The guys at the SEC are not stupid. If the regulators had an idea that you were doing this they'd first try to find the evidence and jail you. And if they that doesn't work, they can just sit on you until they find something else - even if it's something they've dug up in an unrelated business unit in your group.
- jared314 16y ago
  Selling insurance against massive fluctuations would be a sustainable business. You would solve the problem you created and profit both ways.
  - cturner 16y ago
    If there's a high chance of you going to jail each time you do it, that makes it non-sustainable.
    - moe 16y ago
      Let me repeat brisance's question: Any of the directors involved in the mortgage bust served any jail time?
      - cturner 16y ago
        Brisance's question wasn't relevant to what I'd said, or this thread, and that's why I didn't respond.
        moe 16y ago
        How is his question not relevant? You claim that there is a significant risk of going to jail for "Selling insurance against massive fluctuations". That's a bit strange because these insurances (CDS) have been sold on a massive scale over the past years and are considered to be one of the main reasons for the crash. I did not hear about anyone going to jail for it, or did I just miss that part?

deleted 16y ago

[deleted]