Remember when the stock market went crazy and I said someone had unless an ALGO (algorithm used for high frequency trading) that was rogue.
My initial thought was the ALGO was massacring the other AGLOs of other major firms, shorting the daylights out of them, making the other ALGOs short, creating a force-feed backloop of a spiraling market.
Logically killed ALGOs lying everywhere.
That's how I pictured it, sort of like Tron.
I was wrong.
Speedy New Traders Make Waves Far From Wall St.
By JULIE CRESWELL, New York Times, Published: May 16, 2010
http://www.nytimes.com/...
Here, inside the humdrum offices of a tiny trading firm called Tradeworx, workers in their 20s and 30s in jeans and T-shirts quietly tend high-speed computers that typically buy and sell 80 million shares a day.
But on the afternoon of May 6, as the stock market began to plunge in the "flash crash," someone here walked up to one of those computers and typed the command HF STOP: sell everything, and shutdown.
Across the country, several of Tradeworx’s counterparts did the same. In a blink, some of the most powerful players in the stock market today — high-frequency traders — went dark. The result sent chills through the financial world.
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The Tradeworx computers get price quotes from the exchanges, decide how to trade, complete a risk analysis and generate a buy or sell order — in 20 microseconds.
The AGLO Traders had their John Galt moment, and for a brief second the true value of the market was exposed if the "liquidity" of the High-Frequency Trading AGLOs went dark.
I was wrong, it wasn't a rogue ALGO banishing the other ALGOs, it was the lack of ALGOs that killed the market.
Which can happen again, any given business day.
So my bad.