

Maybe computerized trading isn't the problem, but the solution? - cwan
http://businomics.typepad.com/businomics_blog/2010/05/high-frequency-trading-and-the-stock-market-crash-trust-the-computers.html

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quant18
Well, "computerized trading" covers a lot of things. I suspect a big part of
the problem last Thursday was caused by broker algos automatically routing
client orders to alternative venues when the NYSE market data feed delay gets
too high, without concern for liquidity or price at those venues. (So much for
that alleged fiduciary duty to find the NBBO).

Normally not too much of a problem --- except when the market-makers pull
their quotes, the stat-arb guys stop arbitraging, and all the other kinds of
buy side "computerized trading" guys get out of the market and run away scared
...

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yummyfajitas
_(So much for that alleged fiduciary duty to find the NBBO)._

No such duty exists when latency > 1 sec (which it was on NYSE).

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andyjdavis
Personally, as a programmer, I have concerns about hooking anything resembling
an autonomous computer system up to anything important. The stock market,
weapons systems or large industrial systems like oil refineries for example.

Any time you take the humans out of the loop you're playing a dangerous game.
All software has bugs. All software fails in weird unexpected ways at the
worst possible time. When its software that has significant real world
consequences like influencing the markets, firing weapons or operating
equipment that could kill human plant operators and making decisions at speeds
that make human intervention difficult or impossible you're asking for
trouble.

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dablya
Don't they claim the benefit of HFT is the liquidity it provides? Now it turns
out they can pull that liquidity when it's needed the most?

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alttab
Imagine the counter-story: _"High Frequency Trading companies made millions
during stock market crash."_

They knew they would make a lot of money once the market rebounded - they
always do. They make money when the price changes, not if it goes up or down.
These firms were probably trying to prevent the PR storm that they caused it.

Even though they could have possibly made it worse by pulling out, they would
much rather that be the story and gain support than making a lot of money and
being on the other side of a pitchfork mob.

 _Side note: Either way this doesn't mean that they don't control the market
with such high volumes. Getting rid of HFT would almost require waining their
volume over time to help transition to a completely new liquidity system._

~~~
yummyfajitas
Since there are many HFT firms, no individual firm stands to gain by pulling
out and avoiding a PR storm.

This was risk management, pure and simple. The exchanges were likely to break
orders (which they did) and broken orders hurt HFT.

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pavel_lishin
The solution to what problem? Financial firms not making enough money during
calamitous times?

