You know Linux can just stop for a second as it flushes its cache and does memory management. I have seen it in several supposedly real time systems.
Sometimes I wonder about the verbs we choose to describe finance. AOL didn't go down. It didn't "go" anywhere. Somebody's opinion of its value went down. The problem is, we're letting machines have our opinions for us, long long before we've solved the problem of artificial intelligence. The result is opinions and values that aren't very intelligent.
I wonder if the very same algorithm is deciding if I'm a terrorist? Woops - I just made it spike!
Stock trading wasn't really a sane endeavor even prior to computerized (let alone flash) trading. Even contemporarily, there was quite a bit of flesh and blood behind the decisions to create and exploit wonky packaged debt vehicles and predatory lending schemes. Awful lots of "yes-people" in these big firms.
Money. Money money money. If you have enough, or manage enough, you can sorta do what you want. It's extremely likely, for example, that HSBC uppercrusteans (among others, probably) are still seeing to it that the spice of Western Finance-First Morality floweth to unsavory militants and druglords the world over.
I would love it if this kind of story became common knowledge and the stock market would finally collapse. This kind of bullshit is ridiculous. There needs to be a new way...
So someone mistypes a number and the world is going to fall in. It happens all the time, and everything still keeps revolving.
Do a search and you will see its a common occurence.
A simple filter is that if there is a large jump, don't use it until you get a confirming value. ie. a Step not a spike.
I agree with the article's criticism about having inconsistent application of trading rules and problems with retroactively reversing trades, but he keeps calling someone making a very human error as a "dope". Is this what finance is like? Someone makes a mistake, then someone else takes advantage of that mistake to make money, and it's not only allowed, but defended? Does this impact the image finance has to the public?
Linux isn't real-time, at least out of the box.
(There are patches (which I think have never been merged into the main branch) for a real-time kernel, and I'm sure that anyone who uses the platform for HFT would use those. Perhaps not someone who was monitoring trading, so you could see lapses that weren't real.)
Wait, is this a drop i n value or volume?
Neither. It was a single trade at 90% share price of other trades. Could have been for 100 shares. Or a million. The fact that it was just one trade means the share price valuation did not change any more than one guy selling one item at 10% less than the average price on Ebay means all of the identical items are worth 10% less for that single instant.
And for all we know he just needed some quick money to buy that G.I. Joe with the kung fu grip.
No you wouldn't love it. You think the economy is fucked now? A capital market collapse would be something like ten times worse, even after our tax dollars bailed out their bonuses.
It is entirely possible to trade stocks sanely, but in very short terms it is often more profitable to trade them insanely or irrationally. If you are doing it with someone else's money then there is little short-term benefit to managing it carefully and prudently.
If you are trading in an environment where there are big bonuses for short term gambles that pay off, and little penalty when they don't, then the clear incentive is to play the market. When you lose the worst that can happen is you get fired (and have to go live on all those riches you have hopefully accumulated). When you win you get another bonus.
That is all froth on top of the actual market, which is at its core a system for assigning and distributing the value of various enterprises based on a million constantly changing factors. There are major weaknesses, but I have yet to see a 'better way' that doesn't involve repression and massive unintended consequences.
Money. Money money money.
Don't forget cocaine, cocaine, cocaine, cocaine.
Oh, I don't think the stock market should be abolished! It's useful, and I we'd agree there needs to be good regulation and oversight of finance (though we'll always have a revolving-door problem here because oftentimes the only people abreast enough of the scheming to keep a lid on it are the schemers themselves).
I was mainly taking issue with the implication that computer amorality is a problem here. Since these trading bots aren't sapient (afaik; maybe some serious AI specialists would disagree) they're just extensions of human morality. Computers are innately amoral (as yet, anyway). It's the human factor that's sometimes immoral.
If one trusts a computer with huge volumes of money/assets and doesn't know/care about [insert ethical implication of such trust], then they're the problem; a very human problem. Note that a person could, at least in theory, be an ethical, caring, "good" person and still design or participate in a system with a flaw they didn't foresee—cock-up before conspiracy, as they say. Despite spectacular terror-finance headlines, I think most of these people are simply oblivious.
Just to reiterate, if anybody is interested in this stuff I'd suggest economist Mark Blyth, because he writes sympathetically and passionately (and he isn't shy of decrying absolute turds when appropriate, which unfortunately is often).
Yes I am trying to push this as a solution at my work place.
A very effective tool to reduce bullshit criminal shenanigans would be to hold people who commit them criminally responsible. Start with their assets and their freedom. Combine that with accountability for incompetence and the markets would change dramatically for the better.
Not to say that people cannot or should not be able to make mistakes on the market - the whole exercise is supposed to be a high level conversation about risk and return. But trading against your clients and all the other bullshit that happens must be stopped.
Something similar happened to a public company I once worked for (and had a decent amount of stock in) - we saw our normally-20-dollars-and-some stock price drop 90% in the last minute or so of trading. Someone had obviously fat-fingered a sell order, and the resulting sale happened to be the last trade of the session, which made the two-dollars-and-something price the closing price for the day. Lots of hilarity ensued - people thought there was an insider dumping on bad news - until the CFO sent out a company-wide email to set everyone straight. We opened the next day at our usual price. I hope for the trader's sake that the sale got cancelled.
Yeah. I think I would. I'm ready to forage for grubs to subsist, I think about that kind of thing a lot. When I was a kid I thought it would be a nuclear holocaust, later, an environmental catastrophe, lately, a total economic meltdown. All that shit is coming to get us.
I'm just resigned, that's all.
A long time ago (the 90's) I used to work on a very large open outcry trading floor in London. We would occasionally get prints like this, we knew it had never traded there, we'd call Bloomberg up to fix it, and they didn't care, it wasn't them that got hung on a stop etc. As for this, if it's all electronic, it's a good trade. Who knows whether that was someone doing a sell market order with no bids, or it was a machine, and who's loosing? someone's on the other side of the trade.