Flash Crashes More Common Than Thought in World's Biggest Market
(Bloomberg) -- Flash crashes in the pound and Swiss franc have roiled the currency market in the last couple of years -- but there have been dozens of others that have gone under the radar.
Pragma Securities, a quantitative technology company that makes trading algorithms, says almost 100 flash events took place in the $5.1-trillion-a-day foreign exchange market in 2015 to 2016. In a new study, the company looked at tick-by-tick quotes for some of the world's most liquid currencies and came up with a definition for an FX flash crash: a large, rapid price move followed by a retracement, then a sudden and significant widening of the bid-offer spread.
“Extreme price moves are more common than we tend to think,” said David Mechner, Pragma's chief executive officer in New York. “There is a common belief that news events cause flash crashes; however, the research shows that flash crashes often appear without any significant market news.”
Pragma says its index tracks the data behind extreme events in a more systematic way, looking at the speed and magnitude of price moves, the reversion of prices to earlier levels and the widening of spreads. That approach contrasts with anecdotal analysis, which has blamed flash crashes on news headlines, banks or high-frequency traders pulling back from electronic markets, and even the juniorization of trading desks.
To contact the reporter on this story: Lananh Nguyen in New York at lnguyen35@bloomberg.net.
To contact the editors responsible for this story: Benjamin Purvis at bpurvis@bloomberg.net, Greg Chang, Vivien Lou Chen
©2017 Bloomberg L.P.
-
Navigating Friction And Energy Realities: An Analysis Of Marco Rubio's October Visit To India
Occurring at a critical juncture marked by stalled trade negotiations and escalating geopolitical pressures over global energy supplies, the visit offers a profound window into modern US-India relations.
-
India Exports Capital. Why Not Export Trusteeship?
The big question, then, is whether India can build an institution that global borrowers, investors, banks, and lawyers can trust, even without an Indian connection.
-
France's Economy & Politics Are In Crisis | The Reason Why
Let's look at how the French economy and politics evolved under Nicolas Sarkozy, Franois Hollande and Emmanuel Macron.
-
You May Inherit The Business. You Must Earn Its Credibility.
Succession tests the founder's ability to share authority as much as it tests the next generation's readiness to assume it.
-
Signing Deals Is One Thing; Making Them Work Is Another | The Week In Whys
Sometimes, things don't turn out as planned. Indian companies have lost some bids to rivals, some projects won't produce until 2030.
-
FOMC Wall, PERM Suspension, Hospital Stocks | Talking Points This Week
A PERM suspension would directly affect green-card sponsorship rather than H-1B visas, so the near-term earnings impact could remain relatively limited. The key question is whether this marks a new phase in US scrutiny of Indian IT.
-
Everything, Everywhere, All At Once: Dalal Street's Week To Forget | Joining The Dots
Visa curbs, a Starlink spat and cancer drug caps: what connects this week's shocks for Indian markets
-
India Is Going Abroad For Critical Minerals. But It May Take Years To Pay Off | The Reason Why
Although India's steps are in the right direction, they remain modest compared with India's growing dependence.
-
When Everyone Has AI, What Gives You An Edge?
India's young workforce is entering an uncertain world of work where powerful AI tools are becoming widely accessible. The advantage will belong to those who combine deep expertise with digital fluency, and the distinctly human capabilities that technology cannot manufacture.
-
Wrong Labels, High Pesticide Residues Holding Back Agri Exports | The Reason Why
India needs stronger domestic food-safety and labelling standards, with best practices becoming part of everyday business for farmers, traders and food companies.
