Saturday, May 8, 2010

More on May 6 Market Meltdown: HFT and Dark Pools

Wall Street Journal has some interesting bits of information about the stock market near-meltdown on May 6.

In the May 8 article "Computer Trading Is Eyed",

There were abnormally wild moves in currency tradings, [particularly Japanese yen, which surged more than 2% in a matter of minutes (a huge movement in currencies)], before the turbulance started in the stock market.

The heavy sell order on Procter and Gamble (PG) doesn't look like a "fat finger" - i.e. trading mistake, but it does seem to have caused the indices (it is a Dow and S&P500 component) to drop. It does coincide with the withdrawal of liquidity by high-frequency trading firms (see below).

The high-frequency trading firm Tradebot Systems Inc. dropped out of market making when Dow hit -500 mark. So did other HFT firms, draining the market liquidity that they were supposed to provide.

NYSE, when the plunge started, did halt trading, or slowed it. But that probably caused more damage than good, as sell orders, which were growing extremely heavy by the second, were routed to other electronic exchanges including dark pools like DirectEdge, where there was hardly any liquidity. So the sell orders were met by ever-disappearing, ever-dropping bids.

The article still doesn't say WHO placed the big sell order on PG, and WHO stopped the freefall and HOW.

I should also ask, WHY?


Unknown said...

máy bán hàngcó thể được ứng dụng thời gian thực (real-time) hoặc trong phạm vi doanh nghiệp (local).
may ban hangcó thể tích hợp nhiều thiết bị ngoại vi để tăng hiệu suất bán hàng.
may quet ma vach honeywell lựa chọn hoàn hão cho bạn
Máy quét mã vạch Honeywell hãy liên hệ ngay với chúng tôi nếu muốn mua nhé.
máy bán hàng POShệ thống quản lý thông minh
cách chữa hôi miệnghiệu quả nhất mà mọi người nên biết
tré bà đệ mua ở đâuthì bạn nên liên hệ nhé
ship hàng nhật ở địa chỉ nào là tốt ?
ship hàng mỹ

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