

Computer Trading Is Eyed - jaxc
http://online.wsj.com/article/SB10001424052748703338004575230600732737716.html

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jrockway
_"There's no mechanism in the current system to stop an error from crushing a
stock," said Dan Mathisson, head of electronic trading at Credit Suisse._

Yes there is -- the underlying value of the security. If an algorithm bug
pushes a stock to 1 cent a share, someone will probably buy it. And if the
share has any value, someone will probably offer 2 cents. And so on. (If
nobody buys it, maybe it never really had any value.)

Someone will lose money, but they should have tested their software more
carefully.

What nobody seems to mention is that the market recovered just fine after the
accidental sell-off. Sure, it was a down day, but it was going to be anyway.

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jared314
Up or down does not matter. "Something" makes money when the stock moves, and
it moved a lot. (Everyone refers to "Someone" in the stock market. Give it up.
It is "Something" now.)

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pak
Whoever figures out a way to controlledly repeat this little freefall will get
insanely rich. If you knew the DJIA or ACN were going to take these dives,
shorting the market for this period would have made scads of money.

It pains me to think that there are firms on Wall Street right now trying to
figure out how to cause another 1000-point fluctuation and achieve the above.
When so many traders make their money off of volatility, I can't help but
imagine that this entire system will careen towards total collapse as the
trading and the algorithms get faster and more impossible to regulate.

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cturner

        It pains me to think that there are firms on Wall
        Street right now trying to figure out how to cause
        another 1000-point fluctuation and achieve the above
    

What you describe is not a sustainable business model. Not any more than
spreading false rumours about companies and shorting them, or insider-trading
in jurisdictions where it's outlawed.

The guys at the SEC are not stupid. If the regulators had an idea that you
were doing this they'd first try to find the evidence and jail you. And if
they that doesn't work, they can just sit on you until they find something
else - even if it's something they've dug up in an unrelated business unit in
your group.

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jared314
Selling insurance against massive fluctuations would be a sustainable
business. You would solve the problem you created and profit both ways.

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cturner
If there's a high chance of you going to jail each time you do it, that makes
it non-sustainable.

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barkingcat
What if there is a close to zero chance of you going to jail everytime you do
it? When the government and the banks are in collusion, that's what you get.

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cturner
We're talking about the stock market blip from this week. If you can
demonstrate that this happened due to collusion between government and banks,
please do.

