"The head of the New York Stock Exchange has warned that US stock markets have become too concerned with the speed at which trades are executed, as Wall Street reels from another multi-million dollar trading loss.
Duncan Niederauer, the chief executive of NYSE Euronext, spoke as Knight Capital battles to survive a $440m (£286m) trading loss. The company – which makes a market in thousands of shares each day and is under pressure to find a buyer – racked up the loss in a few frantic minutes of trading on Wednesday morning, when one of its computer programs sent out “a ton” of trades in error.
The erroneous orders caused wild swings in the share prices of almost 150 companies, and forced trading in the shares of six of them to be suspended.
Knight’s difficulties have fuelled fears that US markets have become too reliant on automated software programs that can make and execute trades at speeds far faster and in volumes far higher than a human can. The incident should be a “call to arms” for regulators, said Mr Niederauer.
“It is important that we and the regulators are understanding speed is not always better. Nobody rational would look at this [market] and say it isn’t broken,” he said.
The episode has revived memories of the so-called “flash crash” of 2010 in which $862bn was erased from US stock markets in less than 20 minutes. An investigation by regulators blamed a computer–based algorithm. Last month the Securities and Exchange Commission asked America’s stock exchanges to construct a single monitoring system for all share trading.
Shares in Knight Capital soared more than 29pc today after it reportedly told customers it had secured a line of credit.
Tom Joyce, the chairman and chief executive of Knight, whose trading floor was used as the set to film the sequel to the 1980s blockbuster Wall Street, defended the error as “an anomaly”.
Source: NYSE head: speed isn't always good - Telegraph
There is too much high frequency trading tulip going on - people who buy stuff should expect to either use it (ie: turn oil into petrol or turn wheat into bread or beer) or expect to hold on to it for a long time: tax system should encourage that by having very high CGT on any short term profits from trading.
Duncan Niederauer, the chief executive of NYSE Euronext, spoke as Knight Capital battles to survive a $440m (£286m) trading loss. The company – which makes a market in thousands of shares each day and is under pressure to find a buyer – racked up the loss in a few frantic minutes of trading on Wednesday morning, when one of its computer programs sent out “a ton” of trades in error.
The erroneous orders caused wild swings in the share prices of almost 150 companies, and forced trading in the shares of six of them to be suspended.
Knight’s difficulties have fuelled fears that US markets have become too reliant on automated software programs that can make and execute trades at speeds far faster and in volumes far higher than a human can. The incident should be a “call to arms” for regulators, said Mr Niederauer.
“It is important that we and the regulators are understanding speed is not always better. Nobody rational would look at this [market] and say it isn’t broken,” he said.
The episode has revived memories of the so-called “flash crash” of 2010 in which $862bn was erased from US stock markets in less than 20 minutes. An investigation by regulators blamed a computer–based algorithm. Last month the Securities and Exchange Commission asked America’s stock exchanges to construct a single monitoring system for all share trading.
Shares in Knight Capital soared more than 29pc today after it reportedly told customers it had secured a line of credit.
Tom Joyce, the chairman and chief executive of Knight, whose trading floor was used as the set to film the sequel to the 1980s blockbuster Wall Street, defended the error as “an anomaly”.
Source: NYSE head: speed isn't always good - Telegraph
There is too much high frequency trading tulip going on - people who buy stuff should expect to either use it (ie: turn oil into petrol or turn wheat into bread or beer) or expect to hold on to it for a long time: tax system should encourage that by having very high CGT on any short term profits from trading.
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