The Great Debate UK

Who’s to blame for market glitches?

–Tanuja Randery is the CEO of trading services firm MarketPrizm. The opinions expressed are her own.–

A recent spate of high profile trading glitches at NASDAQ, Goldman Sachs and China-based brokerage Everbright, have once again put the spotlight on electronic trading technology and in particular, high frequency trading (HFT), which uses complex algorithms to analyze multiple markets and execute orders based on market conditions.

Since its inception, electronic trading has raised transparency, lowered costs, ensured a better audit trail and dramatically expanded global trading levels.  However, as trading gets faster and faster, the pressure to keep up with quickly moving market needs can lead to using technology before the right controls or audits are in place.

Over the last several months, regulators have been proposing measures to rein in HFT.  In July, the Business, Innovation and Skills Select Committee of MPs released a statement urging the government to assess the potential impact and feasibility of implementing a financial transaction tax (FTT) on high frequency trading.

Why is the West bankrupt?

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By Laurence Copeland. The opinions expressed are his own.

The UK, USA, the PIIGS (Ireland and Italy are together in the same stye), France is in poor fiscal shape  – OK, Germany is ostensibly living within its means, but it looks a lot less solvent when you remember that it has underwritten the rest of the euro zone (in large part, to protect its own irresponsible banks). In any case, as I have argued in previous blogs, this or a future German Government is likely to cave in to the pressure from its own electorate and from inflationist economists at home and abroad to join the party and spend, spend, spend. Only Australia and Canada, riding high on the commodities price boom, and a handful of small countries, look stable.

Where will it all end?

With inflation, almost certainly, but beyond that, it is hard to say. However, there is one prediction I would offer for the medium to long term outcome, and it applies not only to the euro zone, but to Britain and America too – in fact to the whole of the comfortable, complacent industrialised world – and it is this.

from Felix Salmon:

What does the stock sell-off mean?

At 8:30 tomorrow morning, the July jobs report will come out, and it's almost certainly going to be pretty miserable, with headline employment growth of maybe 100,000 new jobs, significantly less than needed just to keep up with population growth. The jobs report is rightly renowned as the most market-moving of all economic indicators, and so market action in the immediate wake of its release is closely watched.

What's going on here? If anybody tries to tell you we're seeing "fears of a double-dip recession," or somesuch, ignore them. Fears of a double-dip recession do not appear overnight, and do not send markets down 3.5% in the course of a morning. When vague "fears" are cited as the prime reason for a sell-off, you can be sure that in fact there's no reason at all. Markets are volatile things, and sometimes this kind of thing happens. If you can't stand it, you shouldn't be invested in stocks in the first place.

from FaithWorld:

Pope slams selfish food speculators, urges curbs on world commodity markets

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(Traders in the Corn options pit at the CME Group signal orders shortly before the closing bell in Chicago, February 11, 2011/Frank Polich )

Pope Benedict said on Friday financial trading based on "selfish attitudes" is spreading poverty and hunger and called for more regulation of food commodity markets to guarantee everyone's right to life. "Poverty, underdevelopment and hunger are often the result of selfish attitudes which, coming from the heart of man, show themselves in social behaviour and economic exchange," the pope told a U.N. food agency conference.

from Felix Salmon:

Why market aftershocks will continue

Neil Hume asks whether the stock-market plunge in Japan is an "overreaction," as markets around the world are exhibiting enormous volatility and uncertainty for obvious reasons.

My feeling is that what we're seeing in the markets today is entirely rational, and that a 3-day move in the Nikkei of less than one annual standard deviation is actually pretty modest given the enormity of what has happened in that country since the earthquake hit early Friday morning.

Is the currency war over?

The communiqué from last week’s IMF G20 finance minister’s meeting was the first step in trying to resolve the so-called global currency war. The ministers released a joint statement on October 23 which pledged that all countries would “move towards more market determined exchange rate systems that reflect underlying economic fundamentals and refrain from competitive devaluation of currencies.”

Even fears that the U.S. and China could have a bust-up over the U.S.’s charge that the renminibi is undervalued relative to the U.S. dollar were put to bed when it was reported that Treasury Secretary Geithner popped in to China on his way back from the G20 in South Korea to meet Chinese Vice Premier Wang Qishan.

Bank of England Inflation report offers markets a reality check

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-Mark Bolsom is Head of the UK Trading Desk at Travelex Global Business Payments. The opinions expressed are his own.-

Sterling tumbled to a one week low against the dollar in trading this morning, after the Bank of England delivered its latest quarterly inflation and growth forecasts today.

Not much stress, not much test

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-Laurence Copeland is professor of finance at Cardiff University Business School. The opinions expressed are his own.-

Back in the 1950’s, when most women stayed at home while their menfolk went out to work, a favourite trick of life insurance salesmen was to walk into the prospect’s home at dinner time and ask the wife:

Risk aversion comes screaming back

-Jane Foley is research director at Forex.com. The opinions expressed are her own.-

The Greek fiscal crisis has forced investors to weigh up the risks of sovereign default very carefully.

A hung parliament offers sterling little comfort

-Mark Bolsom is head of the UK Trading Desk at Travelex, the world’s largest non-bank FX payments specialist. The opinions expressed are his own.-

The final results are almost fully in and despite months of intense speculation the hung parliament outcome has come as an almighty shock to the financial markets.

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