It was programmed trading that gave us the '87 crash, and it happened again

[still_one]

nothing has been learned. In fact things are much worse because they have removed most of the regulation and safeguards at the same time

Anyone who believes the U.S. stock market isn't rigged is quite naive

[DCKit]

1. Anyone who believes the U.S. stock market isn't rigged...

Has been in a coma for the past five years.

Sure, it's been rigged a lot longer, but they stopped pretending about five years ago.

[gratuitous]

2. Congress instituted reforms on programmed trading after 1987

But apparently (and I read this at either Daily Kos or Eschaton, so I'm not sure who said it), Congress repealed those safeguards in 2007. If someone has more information on this, I for one would appreciate it.

[On the Road]

9. Ah, I Had Not Heard That

I have not been able to explain why trading wasn't halted during the mid-day plunge. It's been invoked a number of times for much smaller movements, but obviously not yesterday. For some strange reason, the reporters did not point this out.

:eyes:

If that is true, it is an unbelievable travesty. The reform had been very effective in preventing another 1987, and no long after removing it the same thing happens again. Unbelievable.

[still_one]

10. Now that I recall, you are correct. Why were they repealed? /nt

[Poll_Blind]

3. What you said PLUS the speed at which these algorithms can execute trades is MUCH...

...FASTER. MUCH, MUCH faster.

PB

[Statistical]

4. There were some reforms and circuit breakers put in place but regulation hasn't kept up.

Today the power of program trading networks (they are no longer single entities) is massive and beyond anything they could imagine in 1987. They control far more money, far more leverage, have a magnitude more data (6 gigabits per second flowing off the NYSE), and are running far more complex software (which IMHO nobody really understands).

Also today orders can flow AROUND NYSE to satellite exchanges. Unless has trader has "flow control" they probably have no idea where the broker finds a match and the trade executes.

So when the volatility spiked the NYSE (got to give them credit) did implement liquidity controls however it made the problem worse.
The orders flowed around the NYSE to dozens of smaller exchanges with even less liquidity. The issue was resolved when NYSE rescinded the liquidity controls and allowed high speed electronic trading on NYSE (thus bringing in a pool of buyers with limit orders that triggered).

The NYSE has asked other exchanges in joining them in a unified liquidity control system but they have balked. They see it is as opportunity to gain marketshare & $$$$ when NYSE can't handle orders.

We have a circa 1980s regulatory system for 21st technology based markets.

[kentuck]

5. Do you think this "high speed electronic trading" is OK ?

They play in seconds. Who can make the "play" first? They can buy and sell with the intent to manipulate the market, primarily for personal gain, it seems to me?

[Statistical]

7. No it is part of the problem.

Remember there isn't just one company doing high speed trading. There are hundreds and they all are competing moving enormous amounts of capital around buying a stock holding it for a fraction of a second then selling it to make a 0.002 per share profit (times hundred thousand shares) and then doing that over and over and over nonstop.

It makes day traders look like they are standing still. No human can keep up with it. They design the algorithms and programs and then turn them lose.

They serve absolutely no function (even the much aligned speculators serve a function) and present a danger to financial system.

The entire system needs to be slowed way down. Personally I wish they simply banned High Frequency Trading all together and put hard limits into the exchanges response times. If that doesn't happen they need to be serverly regulation and restricted.

[mopinko]

14. the flip side of the speed of trades, etc, is the audit trail they leave behind.

market manipulation is not as easy as you think. while trading firms might have arbitrage, so do the exchanges, so does the s.e.c. these people are not simpletons. these systems are not games. they are highly sophisticated, and the sort of manipulations that so many here are speculating about are just not possible. futures markets in particular have sophisticated system to catch any attempted manipulation. and in case you think a trader might have nothing to lose, the price of trading seats is in the millions of dollars. few are so stupid as to risk the loss of both the seat price and their lively hood.

[mopinko]

11. your humble opinion is quite mistaken

you may not understand how these computer trades work, and many people who use them do not understand them. but the people who build them understand them quite well, thank you.

there is a great deal of oversight in these markets, as well as built in breakers, and insurance to make whole people 'injured' by 'glitches'. there is also an extensive, extensive amount of audit data that goes along with it.

with all due respect, there is a lot to all this that people do not understand. especially people on the teevee.

[Statistical]

12. They understood them very well at 2:40 PM EST yesterday

Complex systems heaped on complex systems can lead to chaotic and unpredictable outcomes.

Even if that weren't true. High Frequency Trading provides no benefit, no solution, nothing.

It exists to simply siphon money from the market into the pockets of an elite few. It essentially is a market tax that raises the cost of every bid and lowers the price of every ask.

I wouldn't shed a tear if HFT was outlawed tomorrow and the markets wouldn't suffer in the slightest.

[mopinko]

13. well, you won't need any kleenex at any rate

it won't be outlawed, although the markets would "suffer" a great deal if it was. millions and millions of dollars have been invested in the infrastructure of these systems. there are no more buggy whip manufacturers. only oracle and intel, et al, are out there now. your fantasy is impossible. no one is going to go backwards now.

all in all, i think you are flat out wrong to think that there is nothing but chaos. in bygone days there were plenty of quirks like we just saw, only there were no circuit breakers to stop it, no data to analyze what happened, no insurance to make whole the losses. there was only the crash. occasional blips aside, the markets today are remarkable stable. not that there will never be another panic, but there have been plenty of events that in days gone by, even in the 1960's and 70's, would have had world wide repercussions. but they went by with barely a blip.
have you asked yourself how we could be in a war for the most strategic of resources, and there is barely a blip in our home markets? yes, we are in a bad place economically. but compared to the rack and ruin that such a situation would have caused in the dear dead days, we are sailing through.

you are certainly entitled to an opinion, but i respectfully submit that it would be good for you to have more to go on than your opinion.

[damntexdem]

6. It doesn't matter what might have been learned -- because nothing is done based on it.

In a sense, the stock market is not adequately rigged. ;-)

It certainly isn't competently regulated.

[Rex]

8. If that is true, then they did learn something - the market didn't crash this time.

Updates must have caused some latency.