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Saturday, August 04, 2012

Future Flash Crash #3

http://fatherdaughtertalk.blogspot.com/2012/03/future-flash-crash.html
 http://fatherdaughtertalk.blogspot.com/2012/03/future-flash-crash-note.html
 http://fatherdaughtertalk.blogspot.com/2012/03/future-flash-crash-note-2.html
 http://fatherdaughtertalk.blogspot.com/2012/06/why-my-banker-thinks-me-mad.html

These are most of the posts on the coming Flash Crash. Of course, if you have been reading the paper (not ogling TV) you know that it keeps on keeping on. In the New York Times Dealbook on August 3, 2012:

 http://dealbook.nytimes.com/2012/08/03/trading-program-ran-amok-with-no-off-switch/

When computerized stock trading runs amok, as it did this week on Wall Street, the firm responsible typically can jump in and hit a kill switch.
But as a torrent of faulty trades spewed Wednesday morning from a Knight Capital Group trading program, no one at the firm managed to stop it for more than a half-hour.
Some Knight employees and New York Stock Exchange officials noticed the blizzard of erratic orders in the minutes after trading started and sent alarmed messages to Knight managers, according to the exchange and Knight employees who declined to be identified discussing the matter.

As Knight struggled to survive on Friday, employees at the company, market overseers and other electronic trading firms were asking the same basic question: Where was the off switch?
Several market insiders said that they were bewildered, because in a market where trading losses can pile up in seconds, executives typically have a simple command that can immediately halt trading.

“Even just a minute or two would have been surprising to me. On these time scales, that is an eternity,” said David Lauer, a trader at a high-speed firm until a year ago. “To have something going on for 30 minutes is shocking.”
Regulators are planning to look into why there was such a lag...

On Friday, Knight, which in the last decade grew into a leading broker for American stocks, climbed off the mat, securing emergency financing that allowed it to continue operating for the day. It also enticed some of its customers to resume sending client stock trades, two days after it disclosed a possibly fatal $440 million loss from the software problem. But it faced a desperate weekend of maneuvering to find a more permanent solution for its woes. Knight’s short-term financing was meant to keep it alive until Monday, when its executives and advisers hope to have deals completed to remove any doubt about the firm’s future.
Our financial system is continually veering out of control, and it seems that no one is willing to face the reality that events happen much too quickly for human beings to keep up with them. There will always be problems, but there is no time left to cope with them and render them harmless.

It is another big wealth-destruction nail driven into the coffins of the middle-class.
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3 comments:

Baysage said...

Exactly. The big guys always seem to land on their feet after stuff like this happens.

Montag said...

I received a comment from L.W.Dicker under the rubric "Jesus Christ, The Thinking Man's Gospel" here.

I really can't publish it due to language.

My other blogs are OK as to language, but this one has "God" in the title, and I cannot put in certain things in proximity to that name...

Goes against the grain and all that.

Montag said...

Baysage,
When that electronic Frankenstein laboratory of a financial system-stock-market blows up, only Igor will survive.