Trading Tech Talk 33: Flash Crashes, Dark Pools and HFT Drone Wars

Hot Topics in Tech: What do you need to know about financial technology?

• A technical glitch postponed the start of trading in futures and options contracts on Eurex by more than two hours, the latest in a run of breakdowns by exchanges.
• Exchanges around the world are avidly wooing high-frequency traders, those controversial speed demons of Wall Street. Despite the often explosive debate over this kind of trading in the U.S., bourses in Mexico, Turkey, South Africa and beyond are trying to lure HFT types to boost business.
• China, perhaps the last big obstacle to high-frequency trading achieving global dominance, where tight government rules, a stamp duty on stock trades and market inefficiency have so far kept out the algobots. High frequency share trading, which favors “predatory strategies that queue jump institutional and retail investors”, is having a toxic effect on Australia financial markets, according to researchers at the Business School.
• NY AG preps case against Credit Suisse dark pool - New York Attorney General Eric Schneiderman is preparing a civil case against Credit Suisse AG (CS).
• CMEs power of electronic trading let it acquire Nymex: The importance of technology was demonstrated again when CME saved Nymex from disappearing.
• A new report by regulators admits that there was an unusual amount of "self-trading" leading up to the October 15 bond market flash crash. The Treasury market, officially, had its own flash crash.

The Inbox: Listener questions and comments

• Question from GG: Has there ever been talk of some sort of technology glitch or shutdown futures? In the wake of the NYSE problems it seems there would be a fertile market for such a product. Firms could hedge themselves against system risk. Please discuss.
• Question from Eli Minn: Good discussion of the NYSE meltdown. I came away from it agreeing that tech actually saved the day. I guess fragmentation is good for something after all.
• Question from TJD: I know you guys were joking when you talked about HFT boats and blimps. But has there been any serious application of drone tech in the trading world? I have seen them used for combat, photography, movie-making, science experiments and more. Why not trading?