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To celebrate our 50th issue of the magazine, The TRADE
team looks back at the defining moments and influential
people which have steered the industry and made it what it
is today, for better or worse. We also predict five things to
look out for over the next 50 issues.
DEFINING MOMENTS
The Flash Crash
The afternoon of 6 May 2010
would later go down in history
as “the Flash Crash” which saw
trillions of dollars wiped off the
price of stocks only for the market
to rapidly recover in a half-hour
market rollercoaster.
As the morning of 6 May wore on,
negative sentiment began to build
on markets, which saw increasing
volatility and thinning liquidity.
This was the catalyst when a large
mutual fund complex initiated
the sale of $4.1 billion of E-Mini
S&P contracts. Settings for the
algorithm used and the responses
of high-frequency trading firms
meant positions started to be rap-
idly passed back and forth and the
price of E-minis dropped 3% in just
four minutes.
This led to a cascade effect on
other securities and derivatives
contracts and leading spiralling
losses in the market. Eventually
automated stop systems kicked in
and when markets reopened they
rapidly recovered. However, the
event highlighted some of the risks
of automated trading algorithms
and has led to increased regula-
tion for algo providers and users
and the venues which those algos
trade on to prevent a similar event
happening in the future.
MiFID I
Introduced in 2007 and much nar-
rower in scope than today’s major
European regulation, the Markets
in Financial Instruments Directive
was nonetheless a huge change in
the way trades were conducted
across Europe.
The regulation finally opened
up European markets that had
been completely dominated by a
selection of incumbent national ex-
changes and ushered in a new era
of choice and fragmentation. As a
result of new legal structures such
as multilateral trading facilities, a
huge plethora of venues opened
up across Europe. While many
failed, a few have stuck around and
become major players, including
what is today knows as Bats Eu-
rope which has become the largest
pan-European trading destination.
MiFID also helped to profession-
alise the industry by putting more
responsibility on traders and intro-
ducing the idea of best execution,
which would later be followed up
with more force as part of MiFID II.
Facebook flop
While not the only substantial
failure by a listing venue, the IPO
of Facebook was a fairly gargantu-
an and high-profile error by listing
exchange Nasdaq, which would
eventually result in tighter regula-
tion for exchanges.
The shares in Facebook, one of
the biggest tech IPOs ever, were
due to start trading at 11am EST on
18 May 2012 but, due to a technical
problem with Nasdaq, this trading
was delayed until 11:30. This
Winter 2016
TheTrade
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