By John Kemp
ANATOMY OF A FLASH CRASH
In their report on the 2010 equity market crash, the SEC and CFTC staff found that “against a backdrop of unusually high volatility and thinning liquidity, a large fundamental trader (a mutual fund complex) initiated a sell program to sell a total of 75,000 E-mini contracts (valued at approximately $4.1 billion) as a hedge to an existing equity position”.
“This large fundamental trader chose to execute this sell program via an automated execution algorithm (“Sell Algorithm”) that was programmed to feed orders into the June 2010 E-Mini market to target an execution rate set to 9% of the trading volume calculated over the previous minute, but without regard to price or time,” the report noted. “On May 6, when markets were already under stress, the Sell Algorithm chosen by the large trader to only target trading volume, and neither price nor time, executed the sell program extremely rapidly in just 20 minutes”…………..
Whatever happened it is a good thing for the world economy. For a lot of detail about world energy demand and reserves: http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/reports_and_publications/statistical_energy_review_2011/STAGING/local_assets/pdf/statistical_review_of_world_energy_full_report_2012.pdf
One doubt I do have about BP’s figures is that – even the stated average growth in consumption of 2.5%pa over the last ten years – consumption will double every 30 years. Remembering that the economy has crashed badly in that time (along with energy consumption) means we can expect quicker growth if the economy stabilises. How can that be right or sustainable?