Ksenia Galouchko, Albertina Torsoli and Jonas EkblomA rare flash crash in European stocks caused by a Citigroup trader highlights the risks from computer-initiated sell orders worsening a single human error.
“The problem is not the mistake per se, but all the algorithms and stops that were triggered,” said John Plassard, a director at Mirabaud & Cie. “It shows the market is always vulnerable to human error and that algorithms and various CTAs are far too present in markets,” he added, referring to the commodity trading advisers who often use rapid systematic orders to pursue market trends.
It was “the worst day possible for this to happen,” Guillermo Hernandez Sampere, head of trading at asset manager Manfred Piontke Vermoegensverwalt in Germany, said by phone. While the circumstances were unusual, he said the flash crash demonstrated a broader need to take action and prevent such moves in the future.
Between 9.57am and 10.05am on Monday, the Nasdaq Nordic’s total turnover was €378m, about five times the average volume, according to Augustsson. The exchange is in touch with Citi and doesn’t see a reason to cancel any trades, he said.
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