Elsen Head of Quant Analytics & Research Andrew Breton has published a guest post on Thomson Reuters' "Inside Financial & Risk" blog on the concerns of the ‘black box’ model of automated trading in the world of quant investing.
It only took about 15 minutes for the Dow Jones Industrial Average to fall nearly 1,600 points on February 5, 2018. Why? Was there some sort of catastrophic global event that triggered the precipitous fall?
Not really. Besides the fact that New England was still reeling from the Patriots’ Super Bowl loss the night before (a catastrophic event only for my neighbors in Boston), it was a pretty normal day.
The strong industry consensus is that computers caused that Monday afternoon “flash crash.” Algorithmic trading, where computers automatically pick stocks based on complex pre-programmed instructions, “definitely had an impact” on the market swing that day, according to U.S. Treasury Secretary, Steve Mnuchin.
Across the industry, most others shared the same view.
Read the full article at Thomson Reuters' "Inside Financial & Risk" blog.