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Are You Really Protected From Another Flash Crash?

27

April, 2011

Pop Quiz:  Let’ s suppose, hypothetically, you are  trading a non-Russell 1000 stock.  All of the sudden, out of nowhere, the network at a major exchange is hacked by some foreign intruders.  Data becomes corrupted and the high freak “liquidity providers” head for the exits as fast as they can.  Stop limits are being triggered everywhere and the phantom bids that represent today’s equity market have all but vanished.  Your sell order gets executed 29% away from the last trade.  Exchanges are able to quickly locate the source of the

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2 Responses to “Are You Really Protected From Another Flash Crash?”

  1. SanMiguel
    April 27th, 2011 at 8:56 am
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    Isn’t there supposed to be a 10% limit down where no more trades can take place until the next day?


  2. sarnuk
    April 27th, 2011 at 9:03 am
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    Right now, now. There is a SEC proposal dated April 5th: http://www.sec.gov/news/press/2011/2011-84.htm

    This proposal is still in comment period. Right now all we have is an extended pilot program which is in effect until August 11th.


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