Institutional Investor (February Issue)
“For those who build and manage market and trading technologies, 2012 was punctuated by trouble. High-profile system malfunctions marred the BATS Global Markets and Facebook IPOs in March and May, respectively, and brought down market maker Knight Capital Group in August. These too were good new/bad news incidents, not as catastrophic as the still-reverberating ‘flash cash’ of May 6, 2010, but reminders that such technological snafus happen too frequently for comfort. All of this casts a pall over the industry and profession.”
Tags: BATS, Facebook, Flash crash, IPO, Knight Capital, Malfunctions, Technology, Trading
Financial Times (October 4)
The Securities and Exchange Commission (SEC) released its findings on the May 6 Flash Crash when the Dow Jones Industrial Average dropped 1,000 points before bouncing back…all in a breathtaking 20 minutes. The cause was an institutional investor’s $4.1 billion sale of so-called “e-mini” futures contracts to hedge against an equity position. The trade appears to have been legitimate. The SEC must take action to ensure legitimate trades don’t result in excess volatility that scares investors away from stock markets. Measures should include circuit breakers and regulation of high-frequency traders, including requirements that they serve as market makers.
Tags: Circuit breakers, Dow Jones, Flash crash, SEC, Traders
Financial Times (August 23)
High-frequency traders are being scrutinized by the Financial Industry Regulatory Association (FINRA). Broker-dealers that provided clients with direct market access may be fined if they did not implement required risk-management controls. The Financial Times thinks this is a good thing. During the May 6 “flash crash” U.S. stocks dropped almost 1,000 points, yet “officials still do not fully understand what happened.” Regulators need to “catch up.” Technical fixes and new rules can help “ensure markets serve the non-professional users who access them.”
Tags: Broker dealers, FINRA, Flash crash