Rage Against the Machine
I shook my head this morning when I read that Icap's EBS currency-trading system accidentally set off a brief run on the Swiss franc on Wednesday.
According to a Dow Jones report, a mapping error "between the test- and production-trading environments" mistakenly sent a false bid into the market where the euro was priced 0.5 percent higher against the Swiss franc than the going rate. To borrow a line from Seinfeld, “Yada, yada, yada,” and traders began buying euros in the event that this was a sign of a greater trend.
This goes to show how fragile these markets are, and that there is so much more to worry about than just fat-finger mistakes. This wasn't human error; this was a machine—the world's biggest bank-to-bank currency-trading system, according to Dow Jones—responsible for the "mistake.”
Icap is conducting an investigation into exactly what happened, but shouldn't this be a lot more disconcerting to everyone? Icap says it is not going to automatically cancel any Swiss franc trades as a result of the glitch, which means that a machine just cost traders some dough.
So now we've had a Flash Crash and a Swiss Franc Folly. Do incidents like these signal that the markets are fundamentally flawed, or do they simply amount to the price we pay for the interconnected, automated markets that trade at blinding speeds?
One final consideration: If a machine makes an error, it has to be a mistake, right? Otherwise, if it meant to screw with the test environment, that would mean the machine has become sentient ... and that's a horrifying thought.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@waterstechnology.com or view our subscription options here: http://subscriptions.waterstechnology.com/subscribe
You are currently unable to print this content. Please contact info@waterstechnology.com to find out more.
You are currently unable to copy this content. Please contact info@waterstechnology.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@waterstechnology.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@waterstechnology.com
More on Trading Tech
Liquidnet sees electronic future for gray bond trading
TP Icap’s gray market bond trading unit has more than doubled transactions in the first quarter of 2024.
This Week: HKEx's new derivatives platform; GoldenSource; Quonian-SimCorp, and more
A summary of some of the latest financial technology news.
Chris Edmonds takes the reins at ICE Fixed Income and Data Services
Edmonds is now leading ICE’s fixed income and data business as the rush to provide better data and analytics in fixed income builds.
Systematic tools gain favor in fixed income
Automation is enabling systematic strategies in fixed income that were previously reserved for equities trading. The tech gap between the two may be closing, but differences remain.
Waters Wrap: Examining the changing EMS landscape
After LSEG’s decision to sunset Redi, Anthony examines what might lie ahead for the EMS space.
This Week: Clear Street, AXA/AWS, TD Bank/Google Cloud and more
A summary of the latest financial technology news.
LSEG to sunset Redi EMS in favor of Tora
Sources say competitors will look to seize on the decision to win over Redi’s sizeable US client base.
Most read
- Chris Edmonds takes the reins at ICE Fixed Income and Data Services
- Deutsche Börse democratizes data with Marketplace offering
- Waters Wavelength Podcast: Broadridge’s Joseph Lo on GPTs