The Economic Times – By The ET Bureau – May 14, 2012
Sharp market movements caused by algorithmic trading systems is nothing new and even manual traders have made similar mistakes before, said Dr Giles Nelson, co-inventor of the algorithmic trading software Apama, which is used by large institutions across the world.
Market participants need to put in place technology that can do real-time surveillance, said Dr Nelson, who is currently CTO at Progress Software, in an interview with ET. Edited excerpts:
Indian markets have recently faced situations similar to the Flash Crash in US markets, and traders are apprehensive of algorithmic trading. What is your view on this, as someone who has written algo trading programs?
Markets have to react to orders that have prices different from that of the market. Algorithmic trading is seen as more risky because the algos operate faster and things can go wrong quickly. When there are too many such orders away from a market price, then they bounce off each other and can cause a problem. However, we are aware of ‘fat finger’ mistakes. There is nothing new in this — even manual traders can make such mistakes.
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