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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Leader: Trump and an age of disorder

Mr Trump’s disregard for domestic and international norms represents an unprecedented challenge to established institutions.

The US presidency has not always been held by men of distinction and honour, but Donald Trump is by some distance its least qualified occupant. The leader of the world’s sole superpower has no record of political or military service and is ignorant of foreign affairs. Throughout his campaign, he repeatedly showed himself to be a racist, a misogynist, a braggart and a narcissist.

The naive hope that Mr Trump’s victory would herald a great moderation was dispelled by his conduct during the transition. He compared his country’s intelligence services to those of Nazi Germany and repeatedly denied Russian interference in the election. He derided Nato as “obsolete” and predicted the demise of the European Union. He reaffirmed his commitment to dismantling Obamacare and to overturning Roe v Wade. He doled out jobs to white nationalists, protectionists and family members. He denounced US citizens for demonstrating against him. Asked whether he regretted any part of his vulgar campaign, he replied: “No, I won.”

Of all his predilections, Mr Trump’s affection for Vladimir Putin is perhaps the most troubling. When the 2012 Republican presidential nominee, Mitt Romney, warned that Russia was the “number one geopolitical foe” of the US, he was mocked by Barack Obama. Yet his remark proved prescient. Rather than regarding Mr Putin as a foe, however, Mr Trump fetes him as a friend. The Russian president aims to use the US president’s goodwill to secure the removal of American sanctions, recognition of Russia’s annexation of Crimea and respect for the murderous reign of the Syrian president, Bashar al-Assad. He has a worryingly high chance of success.

Whether or not Mr Trump has personal motives for his fealty (as a lurid security dossier alleges), he and Mr Putin share a political outlook. Both men desire a world in which “strongmen” are free to abuse their citizens’ human rights without fear of external rebuke. Mr Trump’s refusal to commit to Nato’s principle of collective defence provides Mr Putin with every incentive to pursue his expansionist desires. The historic achievement of peace and stability in eastern Europe is in danger.

As he seeks reconciliation with Russia, Mr Trump is simultaneously pursuing conflict with China. He broke with precedent by speaking on the telephone with the Taiwanese president, Tsai Ing-wen, and used Twitter to berate the Chinese government. Rex Tillerson, Mr Trump’s secretary of state nominee, has threatened an American blockade of the South China Sea islands.

Mr Trump’s disregard for domestic and international norms represents an unprecedented challenge to established institutions. The US constitution, with its separation of powers, was designed to restrain autocrats such as the new president. Yet, in addition to the White House, the Republicans also control Congress and two-thirds of governorships and state houses. Mr Trump’s first Supreme Court appointment will ensure a conservative judicial majority. The decline of established print titles and the growth of “fake news” weaken another source of accountability.

In these circumstances, there is a heightened responsibility on the US’s allies to challenge, rather than to indulge, Mr Trump. Angela Merkel’s warning that co-operation was conditional on his respect for liberal and democratic values was a model of the former. Michael Gove’s obsequious interview with Mr Trump was a dismal example of the latter.

Theresa May has rightly rebuked the president for his treatment of women and has toughened Britain’s stance against Russian revanchism. Yet, although the UK must maintain working relations with the US, she should not allow the prospect of a future trade deal to skew her attitude towards Mr Trump. Any agreement is years away and the president’s protectionist proclivities could yet thwart British hopes of a beneficial outcome.

The diplomatic and political conventions embodied by the “special relationship” have endured for more than seven decades. However, Mr Trump’s election may necessitate their demise. It was the belief that the UK must stand “shoulder to shoulder” with the US that led Tony Blair into the ruinous Iraq War. In this new age of disorder, Western leaders must avoid being willing accomplices to Mr Trump’s agenda. Intense scepticism, rather than sycophancy, should define their response.

This article first appeared in the 19 January 2016 issue of the New Statesman, The Trump era