FT writes on flash crash currency moves in early Asia trade
Here is a piece in the Financial Times that takes a look at big sharp currency moves in early Asia hours, when its pretty much just NZ and Australina markets trading.
- i.e. after NY has gone home and before Tokyo begins.
I've been banging on about this for years trying to explain it beyond the overly simplistic 'its all the algos fault' and the 'manipulation' cries of the ill-informed.
The FT piece is good, a couple of points from it:
- judging from the spreads between prices where currencies are bought and sold, it is three times more expensive to trade in early Asian hours than when the two largest trading centres - London and New York - are both active.
This (bolding mine) :
- Traders, analysts and market intermediaries point to a range of factors generating this flurry of accidents. Lower numbers of human traders trained at spotting and defusing unnecessary market shake-ups clearly play a role, but the nature of their replacements also matters. Computer-driven algorithmic trading firms tend to pull out of the market when volatility unexpectedly spikes, traders say. Banks also often shut down their computers which spit out prices in these market conditions.
'Its all the algos fault' even when they are turned off? Yeah right. LOL.
In the piece the FT hints at order book imbalances … as a tip they probably should have spent A LOT more time on this as a driver.
Here is the link. FT is gated, but this is essential reading.