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Full Discussion: No evil algo-trader behind the flash crash
Special Forums News, Links, Events and Announcements Complex Event Processing RSS News No evil algo-trader behind the flash crash Post 302459281 by Linux Bot on Monday 4th of October 2010 09:15:02 AM
Old 10-04-2010
No evil algo-trader behind the flash crash
Giles Nelson
10-04-2010 08:28 AM
The long anticipated joint SEC and CTFC report on the 6 May 2010 flash-crash came out last Friday.

After reading much of the report and commentary around it, I'm feeling rather underwhelmed.

The root cause of the flash-crash, the most talked about event in the markets this year, was a boring old "percentage-by-volume" execution algorithm used by a mutual fund to sell stock market index futures. How banal.

The algorithm itself was simple. It just took into account volume, not price, and it didn't time orders into the market. Many commentators have pejoratively described this algorithm as "dumb". It may be simple, but it's one of the most common ways that orders are worked - buy or sell a certain amount of an instrument as quickly as possible but only take a certain percentage of the volume available so the market isn't impacted too much. The problem was the scale. It was the third largest intra-day order in the E-mini future in the previous 12 months - worth $4.1Bn. The two previous big orders were worked taking into account price and time and executed over 5 hours. The flash-crash order took only 20 minutes to execute 75,000 lots.

It wasn't this order on its own of course. Fear in the markets created by the risk of Greece defaulting was already causing volatility. Stub quotes (extreme value quotes put in by market makers to fulfill their market making responsibilities) appear to have contributed. There was the inter-linking between the futures market and equity markets. There was the very rapid throwing around of orders - described as the "hot potato" effect, certainly exacerbated by the many high-frequency traders in the market. There was the lack of coordinated circuit breakers in the many US equity markets. There was the lack of any real-time monitoring of markets to help regulators identify issues quickly.

High-frequency and algorithmic trading have been vilified in many quarters over the last months. I think many were expecting that the flash-crash cause would be a malignant algo, designed by geeks working in a predatory and irresponsible hedge fund, wanting to speculate and make profits from "mom and pop" pension funds. It just wasn't anything of the kind.

The flash crash has raised important issues about the structure of multi-exchange markets, the role of market makers, the lack of real-time surveillance and how a simple execution strategy could precipitate such events. I do hope that the findings in the flash-crash report will ensure a more balanced view on the role of high-frequency and algo trading in the future.



Source...
 

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apport-cli

apport-cli(1)						      General Commands Manual						     apport-cli(1)

NAME

       apport-cli - Command line client for reporting problems

SYNOPSIS

       apport-cli

       apport-cli -c report

       apport-cli -f -p package

       apport-cli -f -P pid

DESCRIPTION

       apport automatically collects data from crashed processes and compiles a problem report in /var/crash/. This is a command line frontend for
       reporting those crashes to the developers. It can also be used to report bugs about packages or running processes.

       For desktop systems with a graphical user interface, you should consider installing the GTK or Qt user interface (apport-gtk or apport-qt).
       apport-cli is mainly intended to be used on servers.

       When  called  without  any  options,  it processes the pending crash reports and offers to report them one by one. You can also display the
       entire report to see what is sent to the software developers.

OPTIONS

       -c report, --crash-file=report
	      Instead of walking over the new crash reports in /var/crash/, report a particular report in an arbitrary	file  location.   This	is
	      useful for copying a crash report to a machine with internet connection and reporting it from there.

       -f, --file-bug
	      Report a (non-crash) problem. Requires specifying --package or --pid.  This will automatically attach information about your operat-
	      ing sytem and the package version etc. to the bug report, so that the developers have some important context.

       -p package, --package=package
	      When being used in --file-bug mode, specify the package to report the problem against.

       -P pid, --pid=pid
	      When being used in --file-bug mode, specify the PID (process ID) of a running program to report the problem  against.  This  can	be
	      determined with e. g.  ps -ux.

ENVIRONMENT

       APPORT_IGNORE_OBSOLETE_PACKAGES
	      Apport  refuses  to  create  bug	reports if the package or any dependency is not current. If this environment variable is set, this
	      check is waived. Experts who will thoroughly check the situation before filing a bug report can define this in  their  ~/.bashrc	or
	      temporarily when calling the apport frontend (-cli, -gtk, or -qt).

AUTHOR

       apport and the accompanying tools are developed by Martin Pitt <martin.pitt@ubuntu.com>.

Martin Pitt							  August 01, 2007						     apport-cli(1)
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