<b>Computer controlled high frequency trading (HFT) Down Under</b><br><br>HFT...

Terrence Miao - 2012-10-28 09:17:07+1100 - Updated: 2012-10-28 09:26:21+1100

Computer controlled high frequency trading (HFT) Down Under

HFT may be behind a spike in the price of major stocks including ANZ Bank when the Australian Securities Exchange opened on Oct 18, 2012

ANZ, Ansell, Aristocrat and AGL were among stocks that leapt in value in the first minute of trading before settling back nearer to last trading day's closing prices.

ANZ jumped $1.67, or 6.5 per cent, to $27.63, when the market opened before falling back to around $26.15.

Patersons Securities Lew Fellowes said the anomaly was likely due to a "black box trading program" - a high-frequency, algorithmic trading system that had gone awry.

Reflecting the US stock market flash crash on May 6 2010 and recent India stock exchange flash crash briefly erases US$58-billion on Oct 5 2012 that in 15 minutes after the 50-stock gauge tumbled as much as 16%.

Question is asked whether HFT is saint or devil?

Read more: http://www.theage.com.au/business/highfrequency-trading-rewriting-the-rule-book-20121026-28azm.html

Terrence Miao - 2012-10-28 09:22:44+1100

+James Gemmell As you are the expert on HFT, any theories, technical glitches or fat fingers, behind distortion of stock market by HFT?

Terrence Miao - 2012-10-28 09:25:06+1100

I don't mind HFT if only way of the stock price is shot up.

James Gemmell - 2012-10-28 15:09:00+1100

It's hard to say for sure whether this was a flash crash without the kind of detailed exchange data that Nanex uses for their research into HFT, flash crashes and the like. http://www.nanex.net/FlashCrash/OngoingResearch.html
But then again, if it looks like a duck and quacks like a duck then it very likely is one. :-)

There are a lot of questions being asked about the usefulness of HFT. The "we provide liquidity" argument has been thoroughly debunked as the liquidity vapourizes when the algos detect a market anomaly and pull out - exactly when it is needed the most.

Kieran Simpson - 2012-10-28 21:08:24+1100

I'm going to go out on a limb +James Gemmell and say the HFT isn't useful except to those who speculate using HFT and thus are directly benefiting by making the market even more of a casino than it already was.

James Gemmell - 2012-11-01 12:11:09+1100

Oh dear - HFT Caught-Red Handed In FX Trading
http://www.zerohedge.com/news/2012-10-31/hft-caught-red-handed-fx-trading

Kieran Simpson - 2012-11-01 13:10:59+1100

"Because in a market in which fundamentals have no bearing on anything, the only thing left is momentum... which works until mean reversion takes place." - Hear hear!!! Fundamentals is the barrier between investing and spinning the wheel.