One Big Order, Thousands of Small Ones, Seen Behind Oil Tumble

One big order, thousands of small ones, seen behind oil tumble

One big order, thousands of small ones, seen behind oil tumble

NEW YORK (Reuters) – A single large sell order in the benchmark European Brent oil market, followed by an abrupt U-turn among high-frequency traders, may have caused one of the most abrupt price routs ever, brokers and analysts said on Tuesday.

As the dust settled on Monday’s four-minute, nearly $4 plunge, other possible causes such as an erroneous “fat finger” trade, a computer program run amok or a broad, rumor-driven sell-off were set aside in favor of a combination of one big trade – potentially as much as 12 million barrels worth some $1.4 billion – and tens of thousands of computerized orders.

“There was most likely a large fundamental seller in the market yesterday,” said Eric Scott Hunsader, Chief Executive of Nanex, a trading consultancy that regularly conducts detailed forensic analysis of erratic market activity.

But assuming a single seller got the ball rolling lower, it was algorithmic traders that almost certainly extended and intensified the decline, causing a 20-fold spike in volume as risk limits or automated price triggers fueled selling.

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About yocijourney

God does not play dice
This entry was posted in Breaking News, Finance, High Frequency Trading, Insider Trading, knight capital, Market Making, U.S. Economy, World Economy and tagged , , , , , , , , , , , , , . Bookmark the permalink.

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