A possible culprit has been found for Wednesday’s sharp movement in cable – which saw the GBP/USD exchange rate drop to 1.5181 and recover in the space of a few minutes. A(nother) tradebot.
To be specific, some market participants are blaming an algorithm gone wild at a Dutch bank.
Zero Hedge has more via a Goldman Sachs note:
GBP – what just happened
To save being asked anymore times – the short answer is I honestly don’t know.. 1.5290 – 1.5168 between 7.56am and 7.57am.. unlikely it was for a fix (that would make sense if closer to 8am), and price action doesn’t suggest a mis-hit since it was ‘walked’ down over the course of the minute albeit exceptionally aggressively (not everyone executes as subtly as we do… no comments please!) We saw Dutch interbank names selling aggressively towards 1.5200 with some suggestion that their algo blew up from a few market sources, although we can’t comment on the validity of this. Needless to say the market has corrected, cable is back above 1.5300, cross now sub 0.8430 , exactly where we started.
We ask again — is it just us, or do there seem to be more of these lately?
Fat fingers/sharp bouts of volatility, that is.
(And not necessarily Dutch ones.)
Related links:
There’s a silver lining in every flash crash… – FT Alphaville
Market upheaval should not be the new black – FT Alphaville
Tradebot shows Goldman what minting money really looks like – FT Alphaville