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发帖数: 978 | 1 By JACOB BUNGE
For once, it isn't the high-frequency traders taking the blame for a wild
market ride.
Germany's main exchange operator has found that a miniature "flash crash" in
late August—in which stock-index futures dived 4% before recovering in a
matter of minutes—was simply the result of a barrage of selling by
financial institutions, and not the handiwork of superfast computerized
traders.
So-called high-frequency trading firms drew suspicions following the
gyration, but an internal report by German exchange operator Deutsche Bö
;rse AG, completed this month but not widely circulated, determined that
such participants' rapid buying and selling actually helped absorb some of
the market shock.
The findings of the report add to the debate surrounding high-frequency
traders among regulators and investors in the U.S. and Europe.
A number of market participants and lawmakers have accused the firms of
exacerbating swings in the markets and called for stricter oversight. U.S.
and U.K. market authorities discussed the rise of computer-driven trading,
including the idea of registering such firms, at a joint meeting in London
last week.
Defenders, though, cite academic studies that portray high-frequency traders
as a positive force.
They show that such fast trading eases pricing imbalances and shrinks the
gap between bids and offers for other investors, including individual
traders.
Over a 17-minute period beginning at 3:45 p.m. local time on Aug. 25, a wave
of orders to sell about 6,000 futures contracts linked to the DAX index of
German blue-chip stocks touched off a plunge in the market, before prices
recovered and jumped by 2% over the next four minutes.
Prices churned because of speculation that Germany, seen as a key anchor of
the euro zone, could see its credit downgraded.
The big moves captured attention because of its resemblance to the May 2010
"flash crash," when heavy selling of U.S. stock-index futures snowballed
into a market-wide upheaval that jammed exchange systems and prompted some
major electronic-trading houses to abruptly stop doing business—moves seen
as contributing to a sudden 9% decline in the Dow Jones Industrial Average.
U.S. regulators later said a large futures trade initiated by a mutual-fund
group touched off the plunge.
In the German case, the initial glut of sell orders, submitted by "
institutional clients" of Deutsche Börse, were entered "in small
batches," in keeping with big investors' usual practice of fragmenting major
orders, according to the report, written by Edward Backes, head of market
supervision for Eurex, which is Deutsche Börse's futures platform.
The idea behind the practices is to allow buyers such as mutual funds to
avoid showing their intentions to the broader market, which then could make
it more expensive to carry out the order.
During the 17 minutes of heavy selling, an average 1,700 DAX futures
contracts traded per minute—versus the 300-per-minute average for the whole
of August—showing that a lack of liquidity in the contracts wasn't the
cause of the heavy price slide, according to the report.
High-frequency firms numbered among the 200 firms that bought futures amid
the sell-off, while there were about 170 sellers.
The "high market liquidity was in large part provided by the actions of the
high-frequency traders, as these participants initially absorbed the major
sell positions and then passed them on to protect the market," Mr. Backes
wrote.
The Frankfurt company is working on a merger with NYSE Euronext that will
make the combined entity the world's biggest overall platform for trading
futures.
The technology race afoot in financial markets is both a "strength and a
weakness," according to Dan Gramza, president of Gramza Capital Management
Inc., which trades and also advises regulators and exchanges.
"You need to have human eyes monitoring technology," Mr. Gramza said. "We've
become complacent with technology, and that is a huge problem." |
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