The Wall Street Journal reports How a Trading Algorithm Went Awry.
"The eagerly awaited report on the causes of the May 6 'flash crash' portrayed a market so fragmented and fragile that a single large trade could send stocks into a sudden spiral.
The report, released by federal regulators on Friday, went further than many in the market had expected by pinpointing one trade by a mutual-fund company as a key contributing factor to the market's plunge.
Regulators say that the firm— which was Overland Park, Kan.-based Waddell & Reed Financial Inc., according to people familiar with the trading—chose to sell a big number of futures contracts using a computer program that essentially ended up wiping out available buyers in the market.
The 104-page report by the staffs of the Securities and Exchange Commission and the Commodity Futures Trading Commission said high-frequency traders quickly magnified the impact of the mutual fund's selling. Among other points, the report shows six of 12 high-frequency trading firms remained in the market as stocks began to crash. However, those firms took 'significant' buying power out of the market. As well, the report plays down the impact of data delays and a shutdown of the links between some exchanges, which the SEC directly oversees."
No comments:
Post a Comment