In the aftermath of the 2010 Flash Crash, the SEC investigated ways to prevent the widespread disruption of prices that led to trades at absurd levels. One of the outcomes was the creation of single-stock circuit breakers across the entire market (SEC document). These breakers are designed to halt trading at specific points to allow markets to stabilize before restarting. Bigger drops triggered longer waits …
I’ve never liked stop loss orders. I’ve seen too many people get blown out of their positions by short term price fluctuations. A glitch October 24th, at ATT’s opening shows the typical pattern. I think we need improved stop lost orders to help retail investors avoid being stopped out during events like these—often at the worst possible prices. In the past most gaps were triggered by …
The recent report from the SEC and the Commodity Futures Trading Commission on the Flash Crash fingers an automatic sell program executed by a “Mutual Fund Complex” as the trigger of the crash. Starting at 2:32 p.m. EDT on the 6th of May this program, referred to as the “Sell Algorithm” automatically sold short 75,000 E-Mini S&P futures contracts (approx 4.1 Billion dollars worth, equivalent …
