SMC | Podcast | The Flash Crash on May 6
by Sunday Morning Coffee | Oct 10, 2010 10:06pm
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Posted to: Town News, Opinion, Podcast, Live Broadcast
On Sunday, 60 Minutes did a piece on speed trading — the use of supercomputers to conduct high frequency trading — and its impact on the financial markets. CTNewsJunkie’s Doug Hardy and SMC Financial Editor Brian Parker discuss the 60 Minutes story, and what happened during the “flash crash” of May 6.
At 2:42 p.m. on May 6 with the Dow Jones down more than 300 points for the day, the equity markets dropped more than 600 points in 5 minutes, causing a panic. By 3:07 p.m. the markets had regained most of the 600-point drop.
According to SMC Financial Editor Brian Parker, if you were investor and lost more than 60 percent of your equity, both the bid and ask side of that trade were later canceled. However, if you lost anything less than 60 percent, you were out of luck. Federal regulators have yet to provide an explanation as to the exact cause of what is now known as the “flash crash,” nor have they provided an explanation as to why trading wasn’t suspended during the anomaly.
However, today’s 60 Minutes story may have shined a little light on what regulators are up against.
Related:
Read & Watch: CBS/60 Minutes: How Speed Traders Are Changing Wall Street
Tags: 60 minutes, smc, sunday morning coffee, high-speed trading, speed traders, may 6, flash crash, market manipulation, cyber attack
Comment
posted by: Brian Parker | November 4, 2010 11:34am
UPDATE: Yesterday the SEC voted to ban “Naked Access” of high speed traders. Naked access is allowing trades to be placed on exchanges without the usual filters or screens associated with trading with traditional brokers. This has been linked too much of the mischief from the “Flash Crash” of 6 May 2010.
As I read the release, I’m struck by the notion that the large, high speed trading (HST) firms are essentially except from this rule. It prevents the small HST firms from unfiltered access but allows the large ones to continue their advantage-trading, because most are set as broker-dealers.
This move, in my opinion, simply eliminates competition and monopolizes the malpractice of high speed trading. It should not be met with public thanks or confidence.