Here too, algorithms were the culprit. Two competing booksellers used a program to automatically bid against each other. Apparently, both parties forgot to include a ceiling in their bids, because the prices skyrocketed. The counter eventually stopped at $23,698,655.93. A human had to intervene to stop the race between the two algorithms.
Flash Crash
More than 70 percent of shares worldwide
A are now traded via algorithms. The dependency on these complex programs is great. There is a risk that if a bit goes iran telegram data wrong somewhere, the ensuing chaos will be uncontrollable and the stock market will collapse.
On May 6, 2010, the above scenario occurred. The Dow Jones suddenly crashed. In no time, the index lost 9 percent of its value. Money disappeared like snow in the sun. A few minutes later, the stock market bounced back and recovered. A five-month investigation by the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) shows that high-frequency trading is the cause of all evil. The speed at which these transactions take place is beyond human comprehension, or as Kevin Slavin says: “It takes you 500,000 microseconds just to click a mouse. But if you’re a Wall Street algorithm
A five microseconds behind, you’re a loser
Frozen in time
Four months before the so-called Flash Crash, Dennis Dick warned about this phenomenon . A floor had A similar incident on lob directory opened his eyes to the risk that algorithms contain: “The real cause may have been high frequency market making gone bad.”
Dick compares the status quo in which algorithms fight each other with a famous scene from the science when we take an interest in supporting fiction film Star Wars. In the film, the rebel ship Millennium Falcon is captured by a tractor beam from the Death Star.
