Saturday, May 08, 2010
Are flash orders to be blamed for Dow's 1,000 points drop?
Before the smoke is clear, fingers are already pointing at flash orders. See these two NYT pieces here and here. Our reader Madan has convinced me previously that flash orders can indeed be used to front-run other traders, but until more evidence comes in, I am yet to be convinced that they are the main culprit. Couldn't old-fashioned automated momentum programs accomplished the same thing after an initial erroneous transaction price and/or quote was reported? Perhaps you know of discussions elsewhere on the blogosphere that bring more light to the issue?