Knight capital markets forex
According to Nanex, those moves might have been premeditated attempts at manipulation, although some, including the SEC report, refute the idea. Either way the circuit breakers put in place to prevent such shock incidents failed to act — a worrying indicator of their fallibility. Hunsader says HFTs sometimes, somehow, work outside of the five to 10 percent parameters set by programmers. Those blunders are likely to continue unless systems and regulators improve, according to Hunsader.
Major firms are reluctant to implement that transparency, however, for fear other companies could copy their transaction patterns. That seems to be the view of Wall Street trader-turned-Cambridge University neuroscientist John Coates, who explores the risk-taking element of trading and its physiological effect in his book, The Hour Between the Dog and the Wolf. He writes that the biological response to risk-taking impairs human judgement, causing jumps and crashes in the stock market.
Computers should theoretically be able to stabilise that, evading the problems human activity entails — but incidents like the Flash Crash suggest the contrary. Insufficient replacements What robot traders do evade are the human-specific elements that have for so long been fundamental — and beneficial — to trading. As human trader control wanes and IT personnel monitoring the algorithms take over , so too does conscious risk-taking, decision-making and intuition, which computers simply cannot mimic.
That lack of thinking capacity can add to the dangers; it was an absence of decision-making ability that saw the robots all suddenly withdraw from the Flash Crash in reaction against the plunges , in turn sparking the stock spikes. And their inability to process and react to changes which might affect share prices in the way a human could means they can instigate significant losses.
Eradicating humans also means reducing the diversity of traders. If one major HFT producer such as Virtu were to monopolise the market, then just one system would be responsible for all trading. According to Husander this too, would be detrimental to trading.
The nature of the Knight Capital's unusual trading activity was described as a "technology breakdown". From Wikipedia, the free encyclopedia. Knight Capital Group Type. Archived from the original on The New York Times.
The New York Times Company. Retrieved 4 March International Directory of Company Histories. Archived at the Wayback Machine. The Securities and Exchange Commission. Retrieved 15 October Retrieved from " https: Webarchive template wayback links. Views Read Edit View history.