Flash Crash Anniversary, I won't be attending this Birthday!!!

  

With the anniversary of the infamous Flash Crash upon us, what has been done to prevent another crash with a far worse outcome?

 

Yesterday, April 5^th 2011 the SEC released a proposal for the Up-Limit, Down-Limit rule to replace the Circuit Breaker rule. Details can be found at the SEC website. Under the proposal, trades in listed stocks would have to be executed within a range tied to recent prices for that security.

Does this rule go far enough or does it restrict the ordinary flow of trading?

 

I remember the afternoon of May 6^th 2010 while monitoring three trading systems. It was a dangerous place to be. Sell “stop-limits” were being picked off like pheasants during hunting season. ETF’s were deteriorating while the authorized participant moved to the sidelines. Arbitrageurs looked on from a distance. Regional-Based ETF's without any ADRs were spiraling downward even though their exchanges had already closed for the day.  So where was the so-called liquidity?

 

Thinking the Flash Crash was a distant memory for me, I once again felt the pain of  May 6^th 2010  when I prepared the Schedule D for my Income Taxes this year. The ole’ Wash Rule was right there, staring me in the face and adding insult to injury.

 

Please take this Flash Crash survey and let me know your thoughts on the matter. It is anonymous, no request for email, no I/P address, no assets under management questions….just your passionate opinion. 

 

https://www.surveymonkey.com/s/FlashCrashSurvey

 

Thanking you in advance,

Austin Neary CFP^®

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.