RMBS Volatility and HFT…

RMBS drops in minutes from $24 to $16 and back up to $23. The word is the move is the result of a “fat finger”.

This illustrates, however, how market structure has changed the velocity in today’s equity markets. “Stop loss” market orders are dangerous in today’s world. Don’t let anyone fool you into thinking that today’s “automated” market makers, who get short sale location exemptions and other benefits, are a substitute for the stabilizing Specialists and Market Makers of just a few years back. It makes one wonder if the AMM’s should have those exemptions and benefits; it seems like the exemptions just give them an unearned advantage.

In addition I am guessing that an HFT order tag (that I hope the SEC adopts) would have  shown, in this post-mortem, HFT firms shorting to take advantage of a bad situation, rather than stabilizing the situation with bids, as they often claim they do in the press.

Issuers (like IBM, Rambus, DNDN, PG) certainly should have a stake and say into current market structure developments, as today’s example shows.