4 ms·

It is incredible engineering and it has incredible downsides, not the least of which is the ability to destroy a market in seconds, due to a blip in information

by SeanDav 13y ago

It is incredible engineering and it has incredible downsides, not the least of which is the ability to destroy a market in seconds, due to a blip in information, with cascading domino effects.

jrockway 13y ago
Which market has been destroyed in seconds?
- skylan_q 13y ago
  None. This provides profit opportunities to those who will "heal" the price. Also, exchanges will revert back trades that happen over these flash crashes.
  - omegant 13y ago
    How long before someone (a hacker no doubt) games the system to create a selling spiral, just waiting to take profit of the rebound. If it´s well planned the one causing the dive is not going to be the one taking the profit (at least that it can be proved).
    - jermy 13y ago
      Well, it's been a common enough movie plot (cf. Casino Royale where the Antagonist engineers terrorist attacks on high-profile companies whilst short-selling their stocks).
    - jzwinck 13y ago
      We need not wait for that to happen. Such shenanigans have been observed and documented already, such as in the book "Reminiscences of a Stock Operator." It was written in 1923, and worth reading today.
    - jrockway 13y ago
      It will probably happen when one of the stock exchanges says "we won't revert fraudulent trades anymore". Until then, I kind of doubt it.
- incawater 13y ago
  None
jhales 13y ago
Assume you are referencing the flash and twitter crash? I always wondered why people never mention how fast it recovered... the ability to heal a market in seconds. The '87 crash was a cascade much more severe and actually involving the whole market that happened without HFT. Also the incredible focus on these two events, considering all the other turmoil in the financial markets, has always struck me as a clear case of scapegoating with Luddite underpinnings. Pretty soon, we will all believe that the recession was caused by HFT's.
- washedup 13y ago
  I agree. The speed at which markets respond to news reveals how efficient the system works. Flash-crashes and what not are either caused by human programming errors or it is simply the right reaction to new information about the environment. We want the new price to be discovered ASAP.
washedup 13y ago
I don't know if "destroy" is the right word, although that can happen. It has the ability to act extremely quickly, which is actually what we want. We want markets to respond to new market conditions quickly so that we know the information has been disseminated throughout the markets. The faster it behaves, the more efficient it is. The problems we see come from human programming errors, not from a mis-networked market. This is incredible engineering.

by SeanDav 13y ago

It is incredible engineering and it has incredible downsides, not the least of which is the ability to destroy a market in seconds, due to a blip in information, with cascading domino effects.

jrockway 13y ago

Which market has been destroyed in seconds?

skylan_q 13y ago
None. This provides profit opportunities to those who will "heal" the price. Also, exchanges will revert back trades that happen over these flash crashes.
- omegant 13y ago
  How long before someone (a hacker no doubt) games the system to create a selling spiral, just waiting to take profit of the rebound. If it´s well planned the one causing the dive is not going to be the one taking the profit (at least that it can be proved).
  - jermy 13y ago
    Well, it's been a common enough movie plot (cf. Casino Royale where the Antagonist engineers terrorist attacks on high-profile companies whilst short-selling their stocks).
  - jzwinck 13y ago
    We need not wait for that to happen. Such shenanigans have been observed and documented already, such as in the book "Reminiscences of a Stock Operator." It was written in 1923, and worth reading today.
  - jrockway 13y ago
    It will probably happen when one of the stock exchanges says "we won't revert fraudulent trades anymore". Until then, I kind of doubt it.
incawater 13y ago
None

jhales 13y ago

Assume you are referencing the flash and twitter crash? I always wondered why people never mention how fast it recovered... the ability to heal a market in seconds. The '87 crash was a cascade much more severe and actually involving the whole market that happened without HFT. Also the incredible focus on these two events, considering all the other turmoil in the financial markets, has always struck me as a clear case of scapegoating with Luddite underpinnings. Pretty soon, we will all believe that the recession was caused by HFT's.

washedup 13y ago
I agree. The speed at which markets respond to news reveals how efficient the system works. Flash-crashes and what not are either caused by human programming errors or it is simply the right reaction to new information about the environment. We want the new price to be discovered ASAP.

washedup 13y ago

I don't know if "destroy" is the right word, although that can happen. It has the ability to act extremely quickly, which is actually what we want. We want markets to respond to new market conditions quickly so that we know the information has been disseminated throughout the markets. The faster it behaves, the more efficient it is. The problems we see come from human programming errors, not from a mis-networked market. This is incredible engineering.