Research (Investicniweb.cz)
World markets  |  January 20, 2013 06:58:11

The threat of collapse of the market is growing



Safeguards against sudden market crash caused by trading in own computer casts later than expected. Last week it admitted representatives of NYSE Euronext and Nasdaq OMX. As explained, many dealers still did not manage to prepare for the new rules. It revived memories of 2010, when a few minutes the Dow Jones Industrial Average lost 9% (flash crash), and many smaller storms that have been made since then. According to Daniel Beunzy of the London School of Economics advent of technology has its pros and cons. The two need to talk.

Repeatedly debated whether computer-driven trading - generally modern technology - for capital markets blessing or a curse. How do you see it?

Daniel Beunza (DB): If you look at how much America is now in the business, you will find that the price went down due algorithms. If you look at how resilient markets, you will find that there has been decline in this category. Bottom line, the last system was more expensive, but better protect merchants from volatility. The current one is cheaper, but cheaper everything has its downsides.

Even so, I would say that there is reason for cautious optimism. Certainly it is not to be treated so that it will henceforth because all algorithms pink. For example, you need to talk about what the market wants, and then think about what algorithms us to get him.

According to some experts, the onset of modern technology destroys the small investor. It has been the way that things were not fair, but still had a chance. Henceforth it is said not to have.

DB: Yes, that is the majority opinion, but I disagree with him. The majority relies on the fact that we are all participating in the same race, but it did not. Everyone can find an opportunity in a time frame that suits him. Someone interested in an opportunity that will appear during the next millisecond, someone focuses on a longer time horizon, that the price of a specific title in a few months will increase. While in the first case, the speed advantage of merchants, in the second individual investor compared to not lose them.

Critics claim that it is due to high-speed trading and similar techniques difficult to predict which way the title is issued, or at what level in a few months will be. This does not apply?

DB: Economic theory says something like this for a long time. People did not mind the possibility of failure decades ago, so why they should bother now? When it averaged, an attempt to estimate how the stock price will evolve, not much of a chance of success. This was before the advent of high-speed trading as well as today.

However, it is not so, it would now be somehow significantly worse than before. Yet many small investors think they do for them in the market is not the place. That is why I think, moreover, that the regulators and the big players will soon have to think about how to attract retail investors back into the game.

When and under what conditions may be based on Daniel Beunzi repeated collapse of markets can be found on the web Investment

Read also:

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  • Small investors have some advantages against the pros

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