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Goldman Co-Head Of Trading: I Am Worried The Market May "Break" And Not Snap Back

• by Tyler Durden

Picking up on our original warning from April 2009, the Goldman strategist warned that HFTs – due to their inability to process nuanced fundamental information - may trigger surprisingly large drops in liquidity that exacerbate price declines, and result in flash crashes.

Himmelberg highlighted the growing market share of HFT and algorithmic trading across all markets, and warned that the growing lack of traditional, human market-makers has made the market increasingly fragile.

He is, of course, correct as active traders will attest, if nothing else then by the collapse in market liquidity around critical, market-moving events when HFTs strategically "pull out" from the market, making price swings especially sharp and resulting in a spike in volatility as shown in the schematic below.

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