Fri, May 6, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Can the next flash crash be better managed with a volatility interruption algorithm?

Friday, March 01, 2013

amb
Dr. Randolf Roth
Mark Melin, Editor of Opalesque Futures Intelligence: A significant issue with High Frequency Trading (HFT) has always been defining the activity and related behavior during times of crisis. "The issue is HFT impact on market stability," noted Dr. Randolf Roth, Head of Market Structure for the Eurex Exchange.

With the May 6, 2010 Flash Crash in mind, Eurex exchange officials detailed their proprietary "Volatility Interruption" algorithm and challenges in HFT definition. The algorithm is essentially a trailing look-back trigger that provides markets a cooling off period when abnormal volatility is detected.

"This is different from a traditional exchange circuit breaker," said Vassilis Vergotis, Executive Vice President, Head of Eurex / Americas. Exchanges traditionally stop trading simply based on a given % price move in a giving market. For instance, if the price of corn were to trigger a circuit breaker in the S&P 500, for instance, trading might stop once a 20% down move in price occurred. Such "lock limit" moves are imposed on a daily basis, on an exchange by exchange basis, and did not prevent the Flash Crash due in part to the speed in which a crash can gain momentum. In an electronic trading world high latency "electronic eye" is utilized by HFT and electronic market makers to monitor and predict liquidity disparity and vola......................

To view our full article Click here

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Comment - Unmasking the men behind Zero Hedge, Wall Street's renegade blog[more]

    From Bloomberg.com: Colin Lokey, also known as "Tyler Durden," is breaking the first rule of Fight Club: You do not talk about Fight Club. He’s also breaking the second rule of Fight Club. (See the first rule.) After more than a year writing for the financial website Zero Hedge under the n

  2. Opalesque Exclusive: Hedge fund talent, fees take a hit at the Milken Global Conference[more]

    Bailey McCann, Opalesque New York: It's been a rough year for hedge funds and now, even other managers are panning them. "Frankly, I’m blown away by the lack of talent," was Point 72 CEO Steven Cohen's assessment of trying to find candidates to hire in the investment business at a panel o

  3. Hedge funds fell in April as alternative UCITS surge in Europe[more]

    Komfie Manalo, Opalesque Asia: Hedge funds shed more in April with the Lyxor Hedge Fund Index down 0.9% during the month (-2.8% YTD), but there was some good news with alternative UCITS showing strong inflows in Europe. In its Weekly Briefing, Lyxo

  4. Global hedge funds recover in April on resurging energy commodities[more]

    Komfie Manalo, Opalesque Asia: Global hedge funds recovered in April with the HFRX Global Hedge Fund Index gaining +0.41% last month (-1.47% YTD), while the HFRX Market Directional Index gained +5.31% during the same

  5. AIG lost $349m in hedge fund portfolio in Q1[more]

    Komfie Manalo, Opalesque Asia: Large US insurance group AIG lost a net $183m for the first quarter 2016, year-on-year. The group blames the loss on the impact of market volatility on investments, as well as net realised capital losses and restructuring costs. Its hedge fund portfolio made a n