The slope of the large drop on the stock market yesterday afternoon is insanity. In my mind there is no question it was not caused by Greece, or the US worker's productivity, or any rational concern. It was pure automated trading, similar models operating in very tight loops, selling in unison. Several blue chip stock's value went to 0, trading at less than a penny.
If I were congress I would enact a simple rule: anyone who buys a stock must hold it for at least one second. This would reduce the systematic danger by making such a high slope impossible.
-- Update Feb16.
Ha, look where I work. I guess another answer is automated trading is so effective and cheap and beneficial in reducing spreads for consumers that it is here to stay. So like early automobiles that were dangerous at first, we work to make them safer. I have read a few analysis of the flash crash, and no longer think HF trading was the predominant cause, nor the one-second rule an effective fix. (Although I'll offer no proof or evidence here).
If I were congress I would enact a simple rule: anyone who buys a stock must hold it for at least one second. This would reduce the systematic danger by making such a high slope impossible.
-- Update Feb16.
Ha, look where I work. I guess another answer is automated trading is so effective and cheap and beneficial in reducing spreads for consumers that it is here to stay. So like early automobiles that were dangerous at first, we work to make them safer. I have read a few analysis of the flash crash, and no longer think HF trading was the predominant cause, nor the one-second rule an effective fix. (Although I'll offer no proof or evidence here).
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