Automatic trading programs arranged Armageddon on the stock exchange
The US Congress is holding a hearing trying to find the cause of the panic that swept the US stock market on May 6 from 14.42 to 02.15 local time. The results of the transactions have already been canceled, and the creation of a special working group of scientists and specialists, who must find at least some explanation for what happened over the fateful 20 minutes , has begun .
During the largest drop in trading history, the market lost about $ 1 trillion. Shares of some blue chips lost almost 100% of their value. For example, iShares Russell 1000 Value Index Fund shares fell from $ 59 to $ 0.08, while tobacco producer Philip Morris fell 90%.
By February 15, the market played out the situation and everything returned to normal. “Everything happened so quickly, as if a torpedo flew by. It was hell, ”Vedomosti quoted the words of Scott Redler, senior strategist at T3 Capital Management.
Obviously, one of the reasons is the triggering of triggers in automatic trading systems. It turns out that this "financial hell" was arranged by computers, but what exactly provoked a chain reaction of the programs - that is the question.
The trading results have already been officially canceled, which caused sincere regret for those traders who earned billions quite easily in a few minutes. True, some are still lucky. NYSE and NASDAQ have not canceled all transactions, but only those in which the sale price is 60% or more different from the share price for a few minutes before the panic. That is, if you closed at 59%, then you will be left with the earned money, but the excess profit will be taken away. This is a fairer decision than completely canceling all transactions from 14.42 to 15.02.
During the week of congressional hearings, the reasons for the panic were not understood. Therefore, the Securities Commission and the Stock Exchange Commission announced the creation of a joint group, which will include scientists, market participants and former regulators. They must find an explanation to avoid repeating such scenarios in the future.
Because if automatic trading will develop, then someone in the future in a few seconds will buy all American corporations at 1 cent per share, and then try to cancel the trading results.
During the largest drop in trading history, the market lost about $ 1 trillion. Shares of some blue chips lost almost 100% of their value. For example, iShares Russell 1000 Value Index Fund shares fell from $ 59 to $ 0.08, while tobacco producer Philip Morris fell 90%.
By February 15, the market played out the situation and everything returned to normal. “Everything happened so quickly, as if a torpedo flew by. It was hell, ”Vedomosti quoted the words of Scott Redler, senior strategist at T3 Capital Management.
Obviously, one of the reasons is the triggering of triggers in automatic trading systems. It turns out that this "financial hell" was arranged by computers, but what exactly provoked a chain reaction of the programs - that is the question.
The trading results have already been officially canceled, which caused sincere regret for those traders who earned billions quite easily in a few minutes. True, some are still lucky. NYSE and NASDAQ have not canceled all transactions, but only those in which the sale price is 60% or more different from the share price for a few minutes before the panic. That is, if you closed at 59%, then you will be left with the earned money, but the excess profit will be taken away. This is a fairer decision than completely canceling all transactions from 14.42 to 15.02.
During the week of congressional hearings, the reasons for the panic were not understood. Therefore, the Securities Commission and the Stock Exchange Commission announced the creation of a joint group, which will include scientists, market participants and former regulators. They must find an explanation to avoid repeating such scenarios in the future.
Because if automatic trading will develop, then someone in the future in a few seconds will buy all American corporations at 1 cent per share, and then try to cancel the trading results.