Slashdot Mirror
House Calls For Hearing On Stock Market "Glitch"
Lucas123 writes "The House Financial Services securities subcommittee plans to hold a hearing next Tuesday to examine what caused the US stock market to plunge almost 1,000 points in a half hour Thursday, and it called on the SEC to investigate possible problems with computer algorithms that may have exacerbated a human order-entry error and led to the precipitous drop. 'Reports have surfaced that much of this movement was potentially as a result of a computer glitch,' Committee Chairman Kanjorski said. 'We cannot allow a technological error to spook the markets and cause panic. This is unacceptable. In this day and age and with the use of such complex technology, we should be able to make sure that our financial markets are effectively monitored and investors are protected.'"
I mean.. they *have* the logs, i hope. I mean they *have* some software anyway which does data-mining to analyze for unusual things....
It doesn't take a subcommittee hearing to figure out that people are finicky and the system is remarkably fragile.
Wall Street sits there.
Nothing gets done.
And in this case, I don't there's really anything to be done. It was a mistake that was corrected and if anyone was hurt, it was Wall Street traders and the only thing I have for them is this nano-tech violin.
If you had your mutual fund or individual stocks, it really didn't affect you.
RIP America
July 4, 1776 - September 11, 2001
Seriously, I bet nothing went wrong. If there are more sellers in the market than buyers the price drops. Automated trading will dump stock into a falling market in a stop loss situation which is what is designed to do. Perhaps they want to go back to a paper based system where people have to place orders in person? Will this affect supply and demand?
Cancel or Allow?
"we should be able to make sure that our financial markets are effectively monitored and investors are protected".
New York, concrete jungle where dreams are Madoff.
"Kill 'em all and let Root sort 'em out"
in b4 "socialism"
The world got to see the reality for a short time and then went back to sleep
http://www.zerohedge.com/article/day-market-almost-died-courtesy-high-frequency-trading
http://www.bloomberg.com/apps/news?pid=conewsstory&tkr=C%3AUS&sid=agW5_B0D1z9M
"CME Group Statement on Today's Market Activity:"
"does not appear to be irregular or unusual in light of market activity today"
Domestic spying is now "Benign Information Gathering"
"This is unacceptable. In this day and age and with the use of such complex technology, we should be able to make sure that our financial markets are effectively monitored and investors are protected." ... because protectig investors is more important than protecting the economy.
WSJ is reporting that the trigger was a very large sell order for P&G coupled with unchecked computer trading and some inherent flaws in the current system of fragmented exchanges.
Felix Salmon also did a good explanatory post that pulled in work from other writers about what might have happened and why.
Mr. Salmon's post links to a thought provoking post by a blogger named Kid Dynamite, who posits that it's a really bad precedent to cancel the erroneous trades because it lets the program traders off the hook for the consequences of their computer mess-up.
*Much* easier to buy on those dips when you can induce the dips with software. Shares dropped to a penny? I'll take a million please!
Please do not read this sig. Thank you.
Who decides that? And what happens to a smart invester that buys stock at $0.01 that usually trades at $40, to quickly later sell it at $30? Will the $0.01 buys be cancelled, but the $30 sells not be cancelled? But that would leave you with a short position, having to buy them back at $40. May be very expensive.
The SEC tried to get the guy who made the error to testify, but they'd already fired him, so he was not in the mood to cooperate.
In a statement the guy declared "I'm going into politics".
All's well that ends well.
Follow the money. SOMEONE made money, it sure as hell wasn't me.....
I'm pretty sure Brazil imported this idea from somewhere else and I strongly belive this place is the US. I just don't know if 1000 points were enough to trigger it. Also, it closes the market for half or an hour for the first it's hit. If it's hit again it closes for more, until it reaches the end of day.
Found it.
If the Dow falls 1100 points before 2 p.m. we would see a one-hour trading halt.
If between 2-2:30 p.m., there is a 30-minute trading halt.
3 p.m. or later, there is no trading halt.
source.
English is not my first language. Corrections and suggestions are welcome.
Is it mere coincidence that the Senate planned for a vote to break up the big banks on the same day?
"In politics, nothing happens by accident. If it happened, you can bet it was planned that way."
-- Franklin D. Roosevelt
It is a miracle that curiosity survives formal education. - Einstein
I'm pretty sure Brazil imported this idea from somewhere else and I strongly belive this place is the US. I just don't know if 1000 points were enough to trigger it.
I am not a stockbroker but my understanding is that there are "circuit breakers" built into the electronic trading system but they don't trip until the market drops 10%. The 1000-point drop was just shy of that, which makes me wonder if there wasn't some deliberate manipulation involved. That's pure speculation, of course, I have no evidence of it.
This ain't rocket surgery.
Except for the part where there are physical goods in stores and actual services are provided by many people working in the services sector.
Nerd rage is the funniest rage.
Wow, we are sinking to new levels of idiocy now.
The MSM would have you believe that the tremendous sell-off in the markets was just a trading error. If it was a trading error, then these markets SUCK! Are you telling me we put TRILLIONS of dollars, including our retirement savings, into a system that can be completely thrown into chaos because a single guy hits the wrong button on a single transaction? It’s a good thing Faisal Shahzad isn’t still working on Wall Street anymore, or he could have just pushed a button and caused a lot more damage that way than he did with a faulty car bomb
This is financial terrorism, folks, retail traders were stopped out and margined out while the pros made Billions picking up the pieces. Don’t worry though, if you are rich enough and connected enough, the Nasdaq will reverse your losses but if they really wanted to make amends, they would cancel the day’s trading for ALL traders.
This market didn’t just sell off because of a trading mistake. Whatever really happened, it happened because there were no real buyers when the selling came - something I have been warning would happen during the last 3 months of low-volume run-ups. I keep using the house of cards/Jenga metaphor and that’s exactly what we have so be very careful when the same idiots who have been telling you BUYBUYBUY are now telling you to "come back in - the water’s fine."
and here:
Having seen the capitulation unfold second by second and then listen to CNBC come up with every excuse under the sun just got under my skin. I've decided to chart some of our one second analytics charts of the capitulation unfolding on our screens. The chart below (more to follow) captures the moment of the final capitulation, before the reversal today. The idea that it was a 'fat finger' error is ludicrous; unless the fat finger hit every market in the world virtually simultaneously. Liquidity simply left the world financial markets for about four minutes this afternoon. The bids just vanished. And what else vanished? Remember the vaunted supplemental liquidity providers, led by Goldman Sachs. Remember that they are paid to "provide liquidity" through their predatory high-frequency algos, they are not required to do so. So when the S@#$T hit the fan they just disappeared. In one second more or less someone (and yes, under these circumstances, human beings take control of the machines) made the decision to pull the bids on every equity in the S&P, every financial futures contract, every FX contract in every market in the world. This kind of thing just doesn't happen in a pure auction environment; there just isn't a tight enough communication link between the parties to allow the decisions to propagate within the same second -- even with HFT algorithms. No. Some human made the decision to pull the bids; all of them, all at once. If that is not a condemnation of the concentration of financial power and the systematic risk it engenders I don't know what is.
Money in the bank just means they invest it for you. This inability to manage your money may mean a worst case scenario of the bank short selling your own company.
they force stop loss positions all over the place. This forces people to sell, and make VIX go up alot.
To be blunt, no one forced those people to place stop orders. They willingly entered into the obligation. I see this sort of complaint as a desire to make the markets nicer and less dangerous than they can be. When you place a stop order, you need to keep in mind that the stop may execute for unintended reasons like some sort of error on the exchange or because someone is fishing (legally or otherwise) for stops.
Let's be sensible here. Stock should (big should) represent the value of a company based on its market value. If a company's doing good, its stock should be valuable because it's backed by the market strength of the company represented.
Thus such a "glitch" should have little effect. But it has incredible effect. Why? Because stock values are horribly inflated. Still, even after the bubble allegedly popped. We're still heaps over value. Have been for quite a while now.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
The assumption of an "honest" error, that is; who is to say that the market isn't being routinely manipulated, and somebody goofed the size of the planned "bump"?
Orwell: "In a Time of Universal Deceit, telling the Truth is a Revolutionary Act"
from the little bit i know about investing, the big picture is intended to be a long-term, i.e. year-long or decade-long, activity. one high volatility event that lasted for a few hours should barely be an asterisk.
"To stop the terrorists."
From what I have read, a big part of the problem is suspected to be those "circuit breakers". The US market is composed of more than 1 exchange, and each exchange has different rules for stopping trading. The computers would simply look for alternate means of trading through another affiliated exchange if the primary exchange was shut off. This dramatically affects the volume of shares available to trade, which in turn can result in wild swings in price. As an engineer I can certainly appreciate how difficult it would be to make such a fragmented system stable under all conditions. It seems as if we stumbled into a series of events that made it unstable for a period of time. There are some who suspect this was orchestrated (aren't there always conspiracy theorists).
... transfered from the small investors who can't watch their stocks all day long, to the big institutional investors, hedge funds, and banks. I am one of those people. When I saw the DOW chart at the end of my work day my heart sank because I knew I had just been fleeced. Given that the market sold off again Friday, and if it continues to drop I suppose I may yet get the last laugh when prices finally end up below where all my stocks/ETFs sold, but for now I can't help but feel cheated.
And yes, per a poster above, the people that really got screwed were small (aka retail) investors who use stop losses and trailing stop losses, which are like safety nets put in place to protect you from steep drops (like October 1987 when the market went down 22%). Stop losses are usually set at a safe distance from the price (8% is a common number) so that they aren't triggered by daily fluctuations. A stock's beta is used to determine a safe stop loss limit. What happened yesterday is the market dropped 9% in 10 minutes, tripping most stop losses, and then it climbed back up 6% in the next 20 minutes. Effectively the shares were stolen
The more you regulate a company, the worse its products become.
Games have rules, strategies, inspectors, and punishment too. Nobody wants to admit it, but these markets are full of shams at all levels -- "legislation and regulation" is just enough to keep the whole game from collapsing, not to make it honest. These "glitches", "crashes", and "abuses" provide occasional glimpses of a not-so-welcome, much deeper iceberg reality. End naive belief, and see overall it's unsustainable long-term, as more profit and waste comes out, and less rational, productive labor goes in. It's not work, economy, and productivity for years, just money gaming. Play according to greed and ability. Enron, Arthur Anderson, Madoff, "subprime" investors, etc were caught in their bluff, but many, many others continue just fine, thank you. But don't let the masses discover it has no foundation, or they will pull out what holds it up - their belief it it, which deposits follow. But marketing works wonders, and the show goes on. Until the structure collapses under it's own weight, or there is no money in the world left to keep pumping in. In the 'cold war' there were two sides, not really so different. One fell under it's own weight of lies. The other stands, so far. With no "social superstructure", there will still be human beings, and their minds and abilities, good or not.
Build your own energy sources from scratch. http://otherpower.com/
That's all interesting, but none of it counts as actual evidence any more than my own speculation does.
This ain't rocket surgery.
I suspect this is another one of those cases where the customer (government) wanted all kinds of features and monitoring but started to cut corners when it came with a price tag. It's amazing how little gets accomplished when the customer wants the pie in the sky features and doesn't realize it costs money.
Yes, I realize this works both ways. It could be that the requested monitoring and features were priced outlandishly by the contractor. In the end, everybody loses. All in all, I'm not going to hold my breath that whatever "technological error" produced this situation will get corrected. I fully expect it to be swept under the rug.
Perhaps someone who knows more about stock trading can help me understand:
1) TFA states that someone made an input mistake and sold 16 billon Fortune 500 stocks instead of 16 millon. Did he have that many to sell? How big a player do you have to be to be able to make these type of mistakes.
2) TFA states that at one point shares for some companies dropped to a mere penny and then rebounded. Were people able to take advantage of the sudden drop to sweep and get a fast couple of millons due to the glitch?
And in conclusion: Does the system's inherent frailty allow this type of event to be orchestrated in order to make a big profit, or a new type of terror attack?
As a Slashdot discussion grows longer, the probability of an analogy involving cars approaches one.
Is there a single member of Congress with a Finance degree? Do any of them have a clue how the market is supposed to work? Are they going to do something that will have a positive influence?
Of course not!
Just a way to look like they are doing something in an election year.
If they were serious about the real problem they would balance the budget.
Professional Politicians are not the solution, they ARE the problem.
Effectively the shares were stolen ... transfered from the small investors who can't watch their stocks all day long...
That's the risk you take when you choose to follow the herd. I'm also a small investor who can't watch my stocks all day long, but guess what? When my stocks go down 10%, I buy more. In fact, some of my stocks were down 90% from their highs during the crash of '08. Yes, I bought more, and yes, I ended up making a lot of money. Of course, I made no where near the kind of returns John Paulson made, so I still have a lot to learn.
Stock market investors basically control society's capital. Their decisions determine how efficiently our resources will be used. So, excuse me for saying this, but I want money to be transferred from emotional, panicky investors to calm, smart investors, because I believe the latter will allocate our resources more efficiently. You can say that you're not an emotional investor, but you've set a trigger (i.e. stop-loss limit) that programs your account to behave like an investor who panics when everyone else is selling.
As a side-note, I hate it how people want to change the rules of the game whenever their strategy stops working: "I set a stop-loss limit, which caused my shares to be sold when they clearly under-valued, so the system must be broken! We have to close the markets early next time." Or: "I blindly trusted the rating agencies (even though they're paid by the companies they're rating) and I lost a lot of money, so the system must be broken! We have to regulate the rating agencies." And on and on and on. People, the system is not fragile. The system is not broken. But your strategy might be.
No sympathy??
Stop-losses are a way for people with regular jobs to mitigate the risk of being in the market, so by having "no sympathy" for people doing their darndest hold on to their value is akin to saying they shouldn't have even been in the market in the first place.
Which brings us to the other problem. If you're not in the market (i.e. have your wealth invested in equity rather than in financial instruments) then you're going to be robbed by the Fed as it allows inflation to destroy your wealth at a rate that is convenient for the government. You can't even win by buying bonds: the returns are lower, there's still the risk of default, and if enough people relied on them, the Fed would just allow inflation to destroy their value as well.
So, please tell us, what course of action wouldn't result in your utter contempt?
Can you be Even More Awesome?!
If the description of what happened is correct, it doesn't sound like a human intervention; the idea that there's one human who could simultaneously pull all the bids from every trader is ludicrous; it implies not just that the market is rigged, but that there's exactly one player rigging it. On the other hand, the idea that an event or events happened that would cause every program bid to disappear is a lot less unbelievable.
Precisely. If you can't take the heat, stay out of the kitchen. Lots of OTHER people had automatic buy orders kick in when the stocks dropped, and they _made_ money on the deal. Would you be crying for them if the drop turned out to be long-term instead of ephemeral? Volatility is one of the risks of being in the stock market. You bet that any severe drop would be long-term, and you lost. They bet it would be ephemeral, and they won. I bet neither way (I have stock which dropped and recovered on Thursday, but no automatic orders) and came out roughly even.
If you want to be invested in equity but want someone else to manage the day-to-day risk, there are plenty of companies which will do that for you. You will of course have to accept a lower expected rate of return in exchange for the reduced risk.
What if you did buy a bunch at an insanely cheap price, the stock bounces back up and you make a mint, then the regulators come in and say "Sorry we're canceling your order". I'd be pissed - and suing!
Oh wait, there already doing that with humans ready to sell and buy ...... but who wants you to know that?
http://www.spiegel.de/international/europe/0,1518,676634,00.html
http://www.pbs.org/wgbh/nova/transcripts/2704stockmarket.html
Officer B. Madoff will show up if you call 911 about it.
If you were subtle about it, spreading out your trades and not hitting the ones with the highest differentials, you could exploit this hack for a long time.
Please do not read this sig. Thank you.
Just put in XX hours of lag on the trading on stocks. The daytrading bring nothing positive to the companies.
- To understand recursion, we must first understand recursion -
This is just a diversion so that those with money invested have time to get that money out before the majority of investors wake up and realize there are huge real problems. The Greek economic crisis is just a taste of the problems to come as developed economies have taken dangerously high proportions of debt to bail out their banks.
The bankers run everything. /paranoid rant
"You people on Wall Street are ruining the economy and cheating people!"
Wall Street Trader screams back : "No Sir! YOU POLITICIANS ARE RUINING THE ECONOMY!"
Wall st plots a failed coup attempting to bribe a few senators and spies. Congress shuts down several corporations, has police arrest executives, who mysteriously disappear the next day, as well as a few senators. Security contractors secure corporation offices, which return to functioning. Newspapers align with corporations and publish numerous humiliating stories of non-corporate senate and congress members in an attempt to discredit and force them out. National Guard barricade, corporate buildings, order military security contractors to stand down, unsuccessfully. Offshore tax haven nations accept executives request for asylum, offers citizenship, government positions and security. Barge with trucks loaded with helicopter parts and unspecified munitions seized by the Coast Guard departing from Florida, crew found to be employed by Lockheed Martin. Shots fired, two coast guard officers and four suspected corporate smugglers dead in the confrontation. Military contractors set up communications center in Union, NJ to coordinate media and security against terrorists, secure services of unnamed contractors, military helicopters observed on location daily. National Guard tear gas barricaded corporate "employees", find they are merely young people posing as employees, buildings are empty. National Guard, with Army reinforcements, takes over national communications infrastructure for emergency communications, announces curfew, warns population of rogue elements carrying weapons in workplaces in NY and NJ. Barricades are seen in tunnels and bridges. Markets fluctuate wildly, gaining and losing daily. Canada and Mexico send diplomatic teams to mediate conflict. "Missing Person" signs and stories begin to appear frequently, quickly addressed by both governments and corporations. Roads and airports out of the country are full. The United Nations sets up 'complementary' offices in Montreal, and meetings take place there. Manhattan's East Side becomes a ghost town. People trade underground newspapers and DVD's in cafes and street corners, with dozens of unconfirmed stories, such as distant government and corporate military bases, prisons, murders, disappearances. Some government and corporate offices are abandoned, some barricaded and off limits, some operate normally. Stories of terrorists attacking governments and corporations are always in the news. Culprits are always arrested quickly and confess. All are foreigners and operated alone or with foreign support. Washington DC and NYC have frequent subway and train maintenance
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Our markets had this feature (I believe its called a "circuit breaker") added after the massive crashes of the '80s. In this case, however, the price declines were not large enough in either velocity or magnitude to trip these automatic safeguards.
We all know what to do, but we don't know how to get re-elected once we have done it
First of all, stop losses are not a "strategy", they are a tactic. My strategy is to invest in solid, widely traded, predominantly blue chip companies or in broad indices via ETFs. None of these types of investments should gyrate 10% in value in a matter of minutes because that means hundreds of billions or even trillions of dollars are vanishing and/or appearing. Of course, sometimes oil wells explode and big companies can take an instantaneous hit in their market cap (stop losses salvaged a year's gains on my BP stock just one week ago). Those types of events are fortunately rare, affect one or a small group of companies and are what stop losses are mostly for. Thursday was more like a magician's trick. One minute the trillion dollars is in his left hand. Then a blink later it's in his right. I suppose it doesn't matter to you that the "left hand" was largely small investors like me and the "right hand" was hedge funds, high frequency programmed traders and banks, but to me something smells rotten.
How exactly does micro-penny programmed trading accomplish this? Positions are bought and sold in microseconds skimming micropennies on each share transacted. The computer with the fastest network access wins. This, you assert, is efficient allocation of capital? This is good because it transfers capital from "panicky emotional investors" to people who will better allocate it? What is the real economic benefit of this activity, because one undeniable side affect of it is to distort and destabilize the market.
I very rarely find myself in favor of increased regulation, but in this case I think the rules do indeed need to be changed. If the majority of people lose faith in the market capital allocation will be severely and negatively impacted.
The more you regulate a company, the worse its products become.
As someone once said, "If you look around the table and you don't spot the mark, it's you."
If Slashdot were chemistry it would look like this:Cadaverine
I wonder whether the synchronous-counter approach would help reduce glitches here. In other words:
- at HH:MM:00 update the prices (and allow the change to propagate; everyone can put in their next trade order)
- at HH:MM:30 execute the trades (and then there are 30 seconds to decide on the new price before a value is propagated)
This is the way that synchronous logic works. The current model is more like hundreds of ripple-counters.
(It would also ensure slightly greater fairness by not giving an advantage to the person with the absolutely fastest network connection, and would slow down the cycles so that a market collapse took many minutes.)
Exactly this. Of course, if the investigation shows it was an attack Wall Street could never admit it. Lack of confidence in the system would be every bit as destructive as the attack itself.
http://online.wsj.com/article/SB10001424052748703338004575230440147772822.html?mod=WSJ_hpp_LEADNewsCollection
stop losses salvaged a year's gains on my BP stock just one week ago
So, you piggy-backed off others' decisions. In other words, some people read the news about BP and decided how much they wanted to sell. But you didn't make your decision based on the news; your decision to sell was based on the fact that the herd was selling. And that turned out to be a good decision. Nothing wrong with that. But there's nothing wrong with people shaking off their coattails, either. If the smart money managers realize that their moves will simply be copied by the herd, then they're perfectly within their rights to game the tactics of the herd. I'm not saying what happened was intentional...but even if it was, I don't see anything wrong with it.
The computer with the fastest network access wins.
No, the smartest investor, man or machine, wins. You can buy or sell within milliseconds, but that doesn't help you if you don't know what will happen in the next millisecond.
How exactly does micro-penny programmed trading accomplish [efficient allocation of capital]?
The same way all trading does: By shifting resources from one use to another. Micro-penny programs just shift micro-resources within fractions of a second, and all of those micro-transactions eventually add up to a major transaction. If you're wondering how a program can possibly make a good decision within milliseconds, then I'd ask, "Does the program make money over the long-term?" If so, then the program must not be random; it must be taking advantage of some pattern it sees. In the end, it doesn't matter how the computer came to its decision; results are all that matter.
one undeniable side affect of it is to distort and destabilize the market.
Suppose the market was only open for one day of the year. Then it would be very stable for 364 days. But stability does not imply efficiency. Sometimes the most efficient thing to do is to allocate resources very quickly and dramatically. You could argue that the 1000-point swing was "random" or "destabilizing", but money was transferred from one group to another, and as you said yourself, these groups are not random. If the second group ends up making better decisions with their new resources, then the market did allocate resources more efficiently within those few minutes!
This was just a little reminder than the "economy" is nothing more than a shared mass delusion.
You know, that's almost exactly what the Zen masters say about reality in general.
This ain't rocket surgery.
Stop-losses are a way for people with regular jobs to mitigate the risk of being in the market,
I have to say that's a bad idea. If you want an escape route that badly and you're not willing to nurse the order in near real time, then you probably shouldn't invest in that way in the first place. IMHO, stop orders are really for short term traders who find ways to work around "regular jobs", if they have them.
And yes, I have no sympathy for people who take risks with their money that they don't understand.
So, please tell us, what course of action wouldn't result in your utter contempt?
First, taking time to understand the market, the tools you plan to use, and the risks. Second, adopting a style of trading consistent with what you're willing to put in for effort, money, etc. If you're a once a week trader, who uses stop orders, then you probably are doing it wrong.
In this day and age because of the use of such complex technology,
There, fixed that for ya.
Any sufficiently advanced intelligence is indistinguishable from stupidity.
Who is to say that you mom isn't being routinely buying crack for sex, and somebody goofed the size of the planned "bump"? ;)
P.S.: You are employing Glenn Beck “logic”. Please don’t.
Any sufficiently advanced intelligence is indistinguishable from stupidity.
Why so serious?
It's getting closer to a time when the entire world economy collapses due to a chained event in the stock markets that wipes out all this virtual equity and maybe then people will start considering a ban on this legalized form of gambling that is today's stock market. Stocks change positions these days based on rumors and lose equity due to glitches and nobody really understands what real equity exists in these companies that are being traded because it so convoluted and vaporous.
We need a Butlerian Jihad against Stock Markets! - (Dune)
Reading your comment, and having seen the most recent episode of FlashForward this morning, I can't help thinking that reality is reflecting art. Sure, it's not "everyone lost consciousness for 2 minutes and 17 seconds", it's more "the markets lost 'consciousness' for X time" ('consciousness' being liquidity) -- but I can definitely see a pattern there. Also with Grifters, and the "7 second delay we introduce between market and foreign traders". I love conspiracy theories. :)
I feel fantastic, and I'm still alive.
I SAID IT earlier, this is High Frequency Trading that drained the market out of all liquidity in seconds, that's what it does.
Don't need a congressional hearing on this, it's simple: HFT computers caused this, not any fat fingers, it's a systematic problem with the US market and it will happen again, just hope next time it happens it doesn't suck ALL money from all speculators and investors who do not have access to these systems.
It's a perfect storm and it is about to hit. You know the Terminator movies? They were right to be scared, only they were scared of the wrong thing. SkyNet is here, and it is trading our money for us, it's going to kill the markets.
Kill it before it kills our money.
You can't handle the truth.
From the NY Times, May 9, 2010
http://www.nytimes.com/2010/05/08/opinion/08durbin.html
"On Thursday afternoon, the Dow plunged 1,000 points within a few minutes, followed by an equally sudden recovery. We don’t know all the details about the drop, but it was almost certainly the result of computer or human error in a high-speed trading program.
Among the many arcane corners of the financial world highlighted by the Wall Street crisis, high-frequency trading — in which computers scan billions of bits of market data for trading opportunities that may exist for mere fractions of a second — has generated a surprising amount of discussion. Alongside the risk of expensive errors like what happened Thursday, critics say, these programs facilitate insider trading and overwhelm regulators’ access to critical information.
These are fair criticisms. Fortunately, they can also be easily addressed without undermining the positive role that high-frequency trading plays in the market.
Let’s start with the insider trading charge. Often, when an exchange operator receives an investor order and finds that another exchange has a better price, it will “flash” the order to a few select traders in its exchange a split second before sending it to market, giving those traders an opportunity to improve their price, too. When used properly, flashing ensures that investors trade at the best available prices.
But that hair’s breadth of time also gives high-frequency traders an opportunity to make a tidy profit off what amounts to insider information. How? Rather than improve their price, the recipient of a flash can go to the other exchange, buy up all the assets at better prices, and force the original investor to trade with them at an inferior price.
We don’t allow trading based on private knowledge of pending business deals or court rulings, and we shouldn’t allow it in high-frequency trading, either. But that doesn’t mean we should ban flashing all together. Instead, to deter abuse, anyone who gets a preview of a trade, whether by phone or flash, should be required to register with an exchange and keep records of every negotiation."
Stock markets are created to promote investors and not traders as it is happening now.
I'd like to buy homeland for our 10 million people. http://twitter.com/mahadiga
When is the congress going to stop lying to the people, this time it is a glitch that is blamed? There is no glitch, the people in power know what is wrong. The US has too much debt and you know why? Because the people in the US bully the politicians into spending all the money they have and someone in charge needs to be introduced to tough love. Give the people what they need not what they want, that is true power and will solve our money problems.
This event has persuaded me to learn more about the stock market. I know slightly more than the average American. Can anyone recommend good resources to start from? I am already reading some blogs listed here and will look at Google and Amazon to books, but I would appreciate some recommendations here too.
"We cannot allow a technological error to spook the markets and cause panic. This is unacceptable. In this day and age and with the use of such complex technology, we should be able to make sure that our financial markets are effectively monitored and investors are protected." You know... the same thing could be said about banking practices. It's easy to whine about technological errors, but when we make the same point about economic errors spooking the market and causing panic, the bankers don't like it either..
Let's put the genes back in Genesis.
The novel "Debt of Honor" by Tom Clancy, especially the chapter called 'Easter Egg' is about an event much like this one. A 'glitch' triggered by two corrected entires causes a loss of transaction data, and at the same time as the 'enemy' (in this case, Japan and other Asian investors) start selling US treasury bonds to bring down the value of the dollar and american stocks while increasing the value of the Yen. In response, the government rewinds all transactions to before the glitch was triggered and gets together with big european investors to start buying back the american trading vehicles hence shittified to increase their value, and so Jack Ryan (TM) saves the world.
The book is implausible in many places but is still an elaborate and enjoyable little drama about these events. I recommend reading it if this story intrigues you and you can tolerate the low-IQ cowboy politics.
That said, this does sound like a conspiracy. Surely there would've been a number of human as well as deterministic safeguards in place for the selling of a billion stocks instead of a million. The market was already spooked by the Greek bailout and going to lose a lot of value, and a well-timed 'computer mistake' was made to help shadow and muddle the apparent cause of some of this damage. Confidence would go down less, keeping the markets afloat somewhat better. For e-discovery purposes, the point-man who made this mistake would be made to look like he was torn to shreds by management, but would not be let go of permanently and will eventually be rewarded by whoever engineered the whole thing. A pretty good play if you ask me.
Either that, or the coke dealers of New York experimented with a new brand of baking soda to cut their product with. Technological advances happen all the time in all sorts of places in that city.