The most awkward flash-crash possible

When your stock exchange wipes 99.75 per cent off its own value in less than a second, it might be t

Felix Salmon shows us his chart of the day, from Zerohedge (click for big):

He explains:

What you’re seeing here is the price of shares in BATS, at 11:14 [Friday] morning [ET]. The white spots are trades: there are 176 of them altogether. They start just below the IPO price of $16, and then just fall lower and lower and lower until the stock is trading for mere pennies. But the key number you want to look at here is not on the y-axis. Instead, it’s the chart report at the very top:

Elapsed Time: 900 Milliseconds

BATS, which stands for Better Alternative Trading System (a name which will surely come to haunt them), is a stock exchange based in Kansas. While most American stocks are listed in one of the two big exchanges, NYSE or Nasdaq, there are multiple venues where stocks can be traded – around 50. These exchanges communicate with each other to work out a "national best bid/offer" (NBBO), which is kept consistent throughout the venues. At least, that's the plan.

What appears to have happened is that a "software bug" (BATS aren't particularly forthcoming with the details) severed, or otherwise corrupted, the link between BATS and the NBBO system for all stocks beginning with A or B. This combined with the high-frequency trading that operates heavily in BATS (indeed, which it was largely set-up to enable) to allow stocks to plummet in less than a second.

For the most part, no-one was hurt. The error was confined to the one exchange, which rolled back the transactions. We would have all learned a valuable lesson about the dangers of computer-aided trading, the proponents of a financial transactions tax would have another weapon in their armoury (high-frequency trading isn't financially viable with a financial transactions tax in place), and everything would go back to normal. We would have, were it not for an excruciating coincedence:

The share that is charted above is that of BATS itself - that is, the company running the stock exchange which suffered the glitch. Not only that, it is the value of BATS on the day it held its initial public offering. Awkward.

BATS the company was supposed to be the first one to be listed (as opposed to merely exchanged) on BATS the exchange. For a smallish company based in a suburb of Kansas City, that is quite a big power grab. Needless to say, it didn't go to plan. The IPO is now cancelled, and the company has "no plans" to try it again soon. Which is unsurprising.

London 2004, back when trades were done by people, not Skynet. Credit: Getty

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Will Euroscepticism prove an unbeatable advantage in the Conservative leadership race?

Conservative members who are eager for Brexit are still searching for a heavyweight champion - and they could yet inherit the earth.

Put your money on Liam Fox? The former Defence Secretary has been given a boost by the news that ConservativeHome’s rolling survey of party members preferences for the next Conservative leader. Jeremy Wilson at BusinessInsider and James Millar at the Sunday Post have both tipped Fox for the top job.

Are they right? The expectation among Conservative MPs is that there will be several candidates from the Tory right: Dominic Raab, Priti Patel and potentially Owen Paterson could all be candidates, while Boris Johnson, in the words of one: “rides both horses – is he the candidate of the left, of the right, or both?”

MPs will whittle down the field of candidates to a top two, who will then be voted on by the membership.  (As Graham Brady, chair of the 1922 Committee, notes in his interview with my colleague George Eaton, Conservative MPs could choose to offer a wider field if they so desired, but would be unlikely to surrender more power to party activists.)

The extreme likelihood is that that contest will be between two candidates: George Osborne and not-George Osborne.  “We know that the Chancellor has a bye to the final,” one minister observes, “But once you’re in the final – well, then it’s anyone’s game.”

Could “not-George Osborne” be Liam Fox? Well, the difficulty, as one MP observes, is we don’t really know what the Conservative leadership election is about:

“We don’t even know what the questions are to which the candidates will attempt to present themselves as the answer. Usually, that question would be: who can win us the election? But now that Labour have Corbyn, that question is taken care of.”

So what’s the question that MPs will be asking? We simply don’t know – and it may be that they come to a very different conclusion to their members, just as in 2001, when Ken Clarke won among MPs – before being defeated in a landslide by Conservative activists.

Much depends not only on the outcome of the European referendum, but also on its conduct. If the contest is particularly bruising, it may be that MPs are looking for a candidate who will “heal and settle”, in the words of one. That would disadvantage Fox, who will likely be a combative presence in the European referendum, and could benefit Boris Johnson, who, as one MP put it, “rides both horses” and will be less intimately linked with the referendum and its outcome than Osborne.

But equally, it could be that Euroscepticism proves to be a less powerful card than we currently expect. Ignoring the not inconsiderable organisational hurdles that have to be cleared to beat Theresa May, Boris Johnson, and potentially any or all of the “next generation” of Sajid Javid, Nicky Morgan or Stephen Crabb, we simply don’t know what the reaction of Conservative members to the In-Out referendum will be.

Firstly, there’s a non-trivial possibility that Leave could still win, despite its difficulties at centre-forward. The incentive to “reward” an Outer will be smaller. But if Britain votes to Remain – and if that vote is seen by Conservative members as the result of “dirty tricks” by the Conservative leadership – it could be that many members, far from sticking around for another three to four years to vote in the election, simply decide to leave. The last time that Cameron went against the dearest instincts of many of his party grassroots, the result was victory for the Prime Minister – and an activist base that, as the result of defections to Ukip and cancelled membership fees, is more socially liberal and more sympathetic to Cameron than it was before. Don’t forget that, for all the worry about “entryism” in the Labour leadership, it was “exitism” – of Labour members who supported David Miliband and liked the New Labour years  - that shifted that party towards Jeremy Corbyn.

It could be that if – as Brady predicts in this week’s New Statesman – the final two is an Inner and an Outer, the Eurosceptic candidate finds that the members who might have backed them are simply no longer around.

It comes back to the biggest known unknown in the race to succeed Cameron: Conservative members. For the first time in British political history, a Prime Minister will be chosen, not by MPs with an electoral mandate of their own or by voters at a general election but by an entirelyself-selecting group: party members. And we simply don't know enough about what they feel - yet. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog. He usually writes about politics.