Thursday, August 25, 2011

Looks Like Some Sort of 'Flash Crash' in Germany

As HFT slithers into more of the world markets, it will be interesting to see if regulators overseas take a far more strict tact than those in the U.S.  Today in Germany we appear to have had a mini flash crash.   The DAX fell some 250 points in a matter of minutes, to trade down 4% on the day, before recovering late in the session to post a 1.7% loss.  That's similar to what happened in the U.S. in May 2010 but in a smaller scale.

Here is the action intraday [click to enlarge]

In 2008 I was writing here that everything is so hair trigger and computerized eventually we're going to see a 1987 type event but one that happens in minutes or an hour - May 2010 was a preview, and while we have more circuit breakers in place, the technology is still way ahead of the regulators.  And when things go bad, liquidity just disappear.  It's not all 'quants' fault, but the market structure has simply changed dynamically. 

Doug Kass has his latest rant against the quants - Kill the Quants, before they Kill Us

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