News and commentary on Thursday’s stock market moves. First, Newsweek, “The Computer Glitch Felt Round the World.” Now, Scott Patterson, WSJ, reports “Did Shutdowns Make the Plunge Worse?” (Business Insider comments, “Everyone is rushing to blame [High Frequency Trading (HFT)] and other non-human problems for the crash… when, at least in part, it may have been the cessation of HFT that exacerbated the plunge.)
Rajiv Sethi, “Algorithmic Trading and Price Volatility,” observes that too many algorithms trying to execute the same kinds of strategies can lead to problems. However, he adds that actions taken by Nasdaq to cancel certain trades in stocks that moved more than 60% is probably a mistake since it simply protects flawed strategies from the consequences of their actions.
At Streetwise Professor Craig Pirrong urges readers to “ignore categorical condemnations of computerized or quantitative trading… There’s good, bad, and ugly. Be careful, and try to distinguish them.” In the post that precedes this conclusion, Pirrong does just that.