Flash crash still a mystery [they say] <By Rachelle Younglai and Jonathan Spicer
WASHINGTON/NEW YORK (Reuters) - Regulators probing the stock market "flash crash" last May still have not uncovered a single cause but will point to "stub quotes" and other previously identified issues as having exacerbated the market's dramatic drop, according to two sources familiar with the probe.
A third source said the U.S. Securities and Exchange Commission is still asking about a "smoking gun" that might explain the May 6 crash, when the Dow Jones industrial average plunged some 700 points before sharply recovering, all in about 20 minutes.
"Quote stuffing," in which large numbers of rapid-fire stock orders are placed and canceled almost immediately, will not be fingered as one of the causes of the crash, sources have said.
But the SEC is increasingly probing market data from other trading days, looking for possible problems with what are sometimes excessive numbers of buy and sell orders, said the third source. continued...>
finance.yahoo.com
No it isn't. Flash crash explained here:
Message 26704432
The Flash Crash was a matter of dueling computers trying to outguess the other models and play chicken with each other. The loser models get wiped by the champs which use the episodes to fine tune their models to do better next time.
They challenge margin levels and generally explore liquidity, looking for weaknesses which can cause cascading sudden big drops and sudden gains too.
It's no skin off my nose if they want to take QCOM to $20 for 1/100th of a second then back up again to $50. I have my idea of value and will sit there with my $20 bid and if they go down there, then thank you Mr Fast Trading Computer. Except that now I can't do that because they'll cancel my successful share purchase.
Qualcomm hopefully is standing in the market with $10 billion in cash at $25 in case such a "Flash Crash" comes knocking on the door.
By trying to avoid Flash Crashes, the market authorities are making things worse, so that crashes might go even further because built into the models will be "trade canceled" risk factors.
Price discovery is not just a matter of finding one person who will trade at a particular price. Studying the depth of the market is a more realistic price discovery process. That's what Flash Crashes do. Run the tide out and see who is wearing bathing suits. I'll be there, lurking underwater with a scuba suit and spear gun, waiting for them. Come on in Mr D E Shaw and Supersonic Traders, the water's fine.
The Folks don't have a problem: <>"The Folks" haven't a chance.<> Just buy when the future profits look good at a particular price. Sell when they don't. Ignore Flashy Crashy Garbage In = Garbage Out Supersonic Fast Trading Computers with fibre to the trading floor.
Mqurice |
