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The Flash Crash, In Miniature

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http://www.nytimes.com/2010/11/09/business/09flash.html?ref=business

BlackBerrys were buzzing inside Progress Energy in Raleigh, N.C.: in a blink, the 102-year-old utility had been virtually wiped out on Wall Street.

For no apparent reason, Progress’s share price had plunged almost 90 percent. In a matter of seconds, a company with 3.1 million customers and 11,000 employees had all but vanished on the nation’s stock market, and Progress executives had no idea why.

In the anxious hours that followed, the answers began to come clear: the harrowing plunge in the early afternoon of Sept. 27 had been a mini flash crash — a small-time version of the stock market’s wild day last spring.

Since the Dow Jones industrial average fell about 700 points then largely recovered on May 6, setting the financial world on edge, similar flash crashes have occurred with alarming frequency in more than a dozen individual stocks.

Citigroup, Core Molding, the Washington Post Company — all have soared, plunged, and often both, in wild, seemingly inexplicable trading. An exchange-traded fund, a popular investment that is basically an index fund that trades like stocks, has also been given the flash treatment, although that was attributed to a software error.

To some analysts, these mini flash crashes are a sign that another big one is possible, if not probable. Others say these abrupt reversals are simply the way modern, lightning-quick markets work, and that investors had better get used to it.

The crashes continue even as Washington regulators investigate the structure of modern markets and as a report traced the main trigger of May’s big crash to a poorly timed trade by a mutual fund in Kansas. Regulators have put in place circuit breakers to halt trading and reset prices in case stocks plunge. But some analysts fear that one day, these mechanisms could be overwhelmed.

..............

Progress Energy stock was trading at about $44.57 a share, and a dealer at an unidentified brokerage firm had entered a mistaken sell order into a computer that instantly drove the price to $4.57. Dozens of trades were declared void, and after a five-minute halt, normal trading resumed.

Nice to see that the system has fail safes some trades at 90% off and the alarm bells don't immediately ring. Typing too fast and get the price wrong suddenly it's mayhem.

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Nice to see that the system has fail safes some trades at 90% off and the alarm bells don't immediately ring. Typing too fast and get the price wrong suddenly it's mayhem.

It's nice to know that it's harder to bring a toy to market for the under-3s than a financial product/system that could put a wrecking ball through the world's financial markets..

I'm sure that if the same regulators had been responsible for the civic safety of Pompeii they would have been happily ignoring the few minor initial eruptions, possibly handing out sweeping brushes.. and loudly denouncing anyone who dared to claim that there could be a problem.

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It's nice to know that it's harder to bring a toy to market for the under-3s than a financial product/system that could put a wrecking ball through the world's financial markets..

I'm sure that if the same regulators had been responsible for the civic safety of Pompeii they would have been happily ignoring the few minor initial eruptions, possibly handing out sweeping brushes.. and loudly denouncing anyone who dared to claim that there could be a problem.

There are posters on here who do not seem to think this is a problem. The attitude beggars belief.

Edited by Tiger Woods?

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  • 146 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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