FT: …..But amid that list there is also another, often ignored, question to ponder: could 2012 produce a repeat of the “flash crash”, the bizarre episode that hit the U.S. equity markets back on May 6 2010?
Think about it for a moment. A full 18 months have passed since the strange episode that caused the Dow Jones [.DJI 12287.04 — UNCH ] to tumble 650 points in half an hour, wiping $850 billion off share prices, before rebounding. Since then, the issue has faded from view amid the eurozone drama.
But to this day, nobody has fully explained what really happened on May 6. Nor is there any evidence that the fundamental problems that caused the flash crash have been resolved. That leaves some scientists fearing that not only is a repeat of that flash crash possible, but it is probable — and next time round, it could be even more damaging.
To understand this, take a look at a fascinating transatlantic research paper published by the Bank for International Settlements. One of the paper’s co-authors is Dave Cliff, formerly a financial trader who now runs the UK government’s Large-Scale Complex Information Technology Systems project, an endeavour that analyses the risks of IT systems in sectors including healthcare, nuclear energy and finance. The other, Linda Northrop, runs a similar project at Carnegie Mellon University, which was initiated a decade ago by the US military.
Categories: Americas, Economics, United States