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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How can the left make the case for immigration?

All too often, we drift into telling people we want to convince that they just don't get it.

We don’t give the public enough credit. You’ll often hear their views dismissed with sighs in intellectual circles. In fact on most issues the public are broadly sensible, most are these days supportive of cutting the deficit and dubious about political giveaways, but in favor of protecting spending on the NHS and education. Yet there is one issue where most, “knowledgeable” folks will tell you the public are well out of step: immigration. 

With [today’s] net migration figures showing yet another record high, it is an ever more salient issue. On a lot of measures ‘too much immigration’ ranks highest as the number one concern (see Ipossmori). The ongoing rise of right wing political parties across Europe demonstrates that simply enough. But concerns about immigration don’t just sit with those with more extreme views, they’re also shared across the mainstream of public opinion. Yet unlike thinking on cutting the deficit or funding the NHS the public consensus that immigration is bad for Britain, flies flat in the face of the intellectual consensus, and by that I mean the economics. 

Given the intense public debate many a study has tried to spell out the economic impact of immigration, most find that it is positive. Immigration boosts the nation’s GDP. As the theory goes this is because immigrants bring with them entrepreneurialism and new ideas to the economy. This means firstly that they help start new ventures that in turn create more wealth and jobs for natives. They also help the supply chains to keep ticking. A example being British agriculture, where seasonal workers are are needed, for example, to pick the strawberries which help keeps the farms, the truckers and the sellers in business. 

Most studies also find little evidence of British jobs being lost (or displaced) due to immigrants, certainly when the economy is growing. Indeed economists refer to such “ “they’re” taking our jobs” arguments as the “lump of labour fallacy’. On top of all that the average migrant is younger than the native population and less likely to rely on welfare, so their net contribution to the state coffers are more likely to be positive than natives as they don’t draw as much state spending from pensions or the NHS. 

So why haven't the public cottoned on? Many progressive types dismiss such views as racist or xenophobic. But it turns out this is to misunderstand the public just as much as the public ‘misunderstand’ immigration. When you study people’s views on immigration more closely it becomes clear why. Far from being racist most people asked by focus groups cite practical concerns with immigration. Indeed if you go by the British Social Attitudes Survey a much smaller number of people express racist view than say they are concerned about migration.  

The think tank British Future broadly set out that while a quarter of people are opposed to immigration in principle and another quarter are positive about it the majority are concerned for practical reasons - concerns about whether the NHS can cope, whether there are enough social houses, whether our border controls are up to scratch and whether we know how many people are coming here in the first place (we don’t since exit checks were scrapped, they only came back a few months ago). But more than anything else they also have very little confidence that government can or wants to do anything about it. 

This truth, which is to often ignored, begets two things. Firstly, we go about making the argument in the wrong way. Telling someone “you don’t understand immigration is good for our economy etc etc” is going to get a reaction which says “this person just doesn't get my concerns”. Despite the moans of progressives, this is precisely why you won't hear left leaning politicians with any nous ‘preaching’ the the unconditional benefits of immigration.

More importantly, the economic arguments miss the central issue that those concerned with immigration have, that the benefits and effects of it are not shared fairly. Firstly migrants don’t settle homogeneously across the country, some areas have heavy influxes other have very little. So while the net effect of immigration may be positive on the national tax take that doesn't mean that public services in certain areas don’t loose out. Now there isn't clear evidence of this being the case, but that could just as well be because we don’t record the usage of public services by citizenship status. 

The effects are also not equal on the income scale, because while those of us with higher incomes scale tend to benefit from cheep labour in construction, care or agriculture (where many lower skilled migrants go) the lower paid British minority who work in those sectors do see small downward pressure on their wages. 

It’s these senses of unfairness of how migration has been managed (or not) that leads to the sense of concern and resentment. And any arguments about the benefit to the UK economy fail to answer the question of what about my local economy or my bit of the labour market. 

Its worth saying that most of these concerns are over-egged and misused by opponents of immigration. Its only a small factor in stagnating wages, and few local areas are really overrun. But the narrative is all important, if you want to win this argument you have to understand the concerns of the people you are trying to convince. That means the right way to make the argument about immigration is to start by acknowledging your opponents concerns - we do need better border controls and to manage demands on public services. Then persuade them that if we did pull up the drawbridge there is much we’d loose in smart entrepreneurs and in cultural diversity. 

Just whatever you do, don’t call them racist, they’re probably not.

Steve O'Neill was deputy head of policy for the Liberal Democrats until the election.