Tag Archives: Algorithmic trading

High Frequency Confusion at London Stock Exchange

The London Stock Exchange is in the process of upgrading its electronic trading systems to attract more high frequency traders, and restore LSE’s digital reputation after an embarrassing technological collapse in November last year. But since the upgrade began this week there’s just been one hick-up after another. On Monday the UK exchange was forced to delay the migration of the full UK order book. On Tuesday the closing process was delayed, resulting in confused computer algorithms, wrongfully executed trades and sparking volatility. Today traders was left frustrated by incorrect pricing.

“We are confident with the systems generally and how they’ve performed, given the scale of the project.”

London Stock Exchange


Both Thomson Reuters, Selftrade and TD Waterhouse are warning their clients that they in “some scenarios” are not able to provide correct bid and ask prices, and that there’s no estimates  on when the problems will be fixed. The effect is confused computer algorithms, triggering trades at the wrong time and sparking volatility, the Financial Times reports.

“People were trading at prices they weren’t expecting to be trading at,” one trading expert at a foreign bank in London says.

Other traders, however, say they have seen little disruption: “It’s smooth sailing here,” another trader says.

And – of course – the London Stock Exchange don’t see any problems at all.

“We are confident with the systems generally and how they’ve performed, given the scale of the project,” a spokesperson says. “We have had a constant dialogue with customers and the feedback we’ve had has been very good.” Adding that LSE is looking into the matter, but are still “confident that the system will be okay today”.

Anyway – the London Stock Exchange was on Wednesday dealing with the fallout from another technology glitch as some traders expressed frustration over disruption to the bourse’s closing auction at the close of business on Tuesday, according to FT.

Execution-only brokers including Selftrade are warning that their websites are not showing correct prices.

Thomson Reuters warns clients that its bid and ask prices are, “in some scenarios, intermittently updating with zeros ahead of an updated value,” saying the problem was first identified on Tuesday morning but could not  give any estimate on when it would be fixed.

TD Waterhouse says in a statement: “Currently a technical issue between the LSE and one of our data providers is affecting stop-loss orders on UK stocks. As an interim measure we have taken the decision to manage the existing orders on our book and stop taking new orders.”

Adding: “Customer impact has been minimal as stop orders are a small fraction of our daily trading activity and we working with the LSE and the data provider to fix the problem. We hope to bring this to a speedy resolution.”

The LSE suffered a blow to the credibility of its new technology in November when a two-hour outage hit not long after it had switched to using MillenniumIT technology on its Turquoise trading platform.

Initially the LSE indicated that the problem may have been sabotage but an investigation concluded last month that it had been “human error”.

Wonder what they will come up with this time…

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New Topic: High Frequency Trading – Splitting The Market?

Last topic started with the question: “Sovereign Debt – Just Take The Punch?” Point being will the best thing for countries in economic distress be to just default, restructure, go bankrupt like any other insolvent company and get over it? Over the summer its pretty clear that the answer is “yes.”

“Case closed.”

econotwist


Not being an expert in anything, just trying to apply some common scene to things, I really can’t see any other way around the problem of rising national debt than to let some of it go. It ought to be possible for a country like Greece to file for chapter 11, or 13, or something, to make a fresh start. If today’s policy is not changed, the EU will have a sovereign debt/GDP ratio of more than 400% by 2050.

440%, to be precis, according to the latest analysis by The International Monetary Fund.

And the IMF adds: “The surge in debt in this scenario, however, does not even take into account the possible negative feedback effects that higher debt could have on interest rates and economic growth.”

Brace yourselves, this is not a pretty picture:

(Download the report here.)

“Decisive action is needed to turn deteriorating public finances around without hampering near-term growth prospects. Markets have recently shown increased concern for fiscal vulnerabilities in advanced countries. Such concerns undermine confidence and threaten the economic recovery,” IMF says.

However, if eventually such “decisive action” will be taken, is still an open end deal.

“It is overly optimistic to assume that this can continue forever. The conflict that opposes bond holders to other government stakeholders is more intense than ever, and their interests are no longer sufficiently well aligned with those of influential political constituencies,” Morgan Stanley analyst Arnaud Marès writes.

And points out: “There exists an alternative to outright default. ‘Financial oppression’ (imposing on creditors real rates of return that are either negative or artificially low) has been used repeatedly in history in similar circumstances.”

Morgan Stanley seem to to have arrived at the same conclusion as myself and many others.

“Ask Not Whether Governments Will Default, but How,” analyst Arnaud Marès states.

So, as far as the MoonTalk is concerned; case closed.

Will the HFT Split The Financial Markets?

Our nest topic is just getting hotter and hotter.

The so-called high frequency trading is starting to dominate the markets to a degree where the super fast computers at Goldman Sachs, Morgan Stanley, Deutsche Bank, and a handful of other supreme actors, are making it impossible for others to participate in the day-to-day trading.

However, it don’t seem right to put the breaks on the technological innovation, does it?

But neither is it fair that some traders get faster access to the markets, and to market sensitive information,  than other investors do.

This financial speed dating is ripping the market apart, many market participants warns.

Well, let’s rip it then…..

Divided Anyway


Why not split the markets in two – one limited part of the tradeable assets made available to for the mega-machines to play with, the other made exclusively  available to traditional investors through the traditional channels?

Some definitions of who belongs where have to be made, and there would have to be a limited room for judgment.

But, when the EU implemented the MIFID-directives a couple of years back, after the first round of financial turmoil, they divided a clear distinction between “professional” and non-professional investors.

You now have to certified as a “professional” investor, with a certain amount of knowledge, in order to trade more sophisticated instruments.

There is already a divided market in terms of intellectual capacity.

The development of trading systems are getting close to the speed of light.

Perhaps there should be a classification in terms of technical capacity, too?

Feel free to post comments and guest posts.

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Testimony Of A High Frequency Trader

The so-called “flash crash” at the New York Stock Exchange on May 6th was naturally one of the the main issues  at Golden Networking.net’s High Frequency Trading Leaders Forum 2010 last week. Among the key participants was Mr. Manoj Narang, founder and CEO of Tradeworx, one of the HFT firms that stopped trading on May 6th. Below is a transcript of the conversation between Mr. Narang and The Wall Street Journal‘s Scott Patterson that took place after the formal speeches.

“The market was ripe for a catastrophic event, because it was so saturated with stop orders, all it needed was a catalyst.”

Manjo Narang

“I want to call it Seis De Mayo because I believe it’s a vindication day for high frequency traders. I think that fingers were very quick to be pointed in the direction of High-Frequency Trading for this meltdown; I think that the post-mortem has not been written yet on this episode, but what’s abundantly clear is that like has been the case in every other crisis in recent memory, humans were intimately involved and fully responsible for this particular meltdown as well,” Mr. Narang said in his speech at the HFT Leaders conference.

After the speech, the following conversation took place between Manjo Narang and WSJ-reporter Scott Patterson who wrote a groundbreaking article on high frequency trading last year:

Read the full transcript at The Swapper.

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