A lot already has been written about today being the one year anniversary of the “Flash crash.” Most of the articles out there are throwing out a couple numbers and giving a perspective of whether changes made since then are having any sort of effect to prevent another “incident.” That’s fine, but sometimes it’s important to just go back and remember why this was a big deal. (more…)
In the year 2010, ground-breaking legislation was passed by Congress that would curb transgressions that helped cause the 2008 financial crisis. Also in 2010, mid-term elections changed the balance of the U.S. Congress, giving Republicans a majority in the House with Democrats retaining a majority, barely, in the Senate. Thus the financial reform bill is targeted by the new House majority, who promises to rip it apart. (more…)
According to a story put out by Cornell University on Dec. 1, investors, traders and regulators may have another early warning system to help prevent another market crash like the one on May 6. Instead of feeling panic and fear that investments could again be wiped out in seconds, they can rest assured that future “flash crashes” now might be “predictable and possibly preventable” thanks to a metric developed by two professors at Cornell University. (more…)
Earlier this month the Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) released their report detailing the events of May 6. While that report points to a single sell order by a large mutual fund, identified by media sources as Waddell & Reed, as the culprit that caused the “flash crash,” that conclusion quietly has been called suspect by many. Now one data processing firm, Nanex, has come forward with an interpretation of the day’s events which recasts the fund and other players of the day. (more…)
Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler and Securities and Exchange Commission (SEC) Chair Mary Schapiro begin an op ed piece in the USA Today with the following: “The missions of the Securities and Exchange Commission and the Commodity Futures Trading Commission are to protect investors and ensure our derivatives and securities markets are as fair, transparent and efficient as possible.”
That line has past CFTC Chairman Philip McBride Johnson a little worried because it suggests that the two agencies are in the same business when they exist for quite different purposes and could reprise efforts to merge the two.
There have been a number of theories floated regarding what caused last Thursday’s “flash crash” in equity markets but to date no one has provided a definitive explanation.
The first story was that someone keyed in “B” for billion instead of “M” for million on an equity order in Procter & Gamble. P&G was one of the first stocks where odd price behavior was observed, which is probably the essence of that rumor. That has never been confirmed and I am not sure of any system that accept orders that way, most you must enter the numeric value — hence the term fat fingered error (holding down the zero key for an extra beat increasing the order X10, X100 or X1,000). A larger broker dealer that was cited in several stories denied that a fat fingered error by one of its traders was the cause of the crash. (more…)
