BOE ok to let the flash crashes continue

Bank of England sees no problems with algorithmic trading

The BOE’s head of market’s, Chris Salmon today said that the bank saw no need to restrict algo trading and that high frequency trading was beneficial to markets.

Ultra high-speed automated trading by computer algorithms has made markets more efficient
We should expect further flash crashes in core global markets
Ultra-fast trading in stock, bond and currency markets and accompanying “flash crashes” do not call for immediate action from regulators
Potential for longer-lasting consequences from flash crashes would add to a case for public policy action
Nothing is flashing red that requires an immediate response

Speaking at a conference he added;

“Specifically, in my view, we are not yet in a position to rule out that future flash episodes might interact with aspects of financial market infrastructure in a way that gives rise to longer-lasting disruption,”

HFT and algos are the spawn of Satan according to many traders but their use is something that is adding a huge amount of liquidity to the market. The huge downside is that computer and automated trading is reducing the human factor in trading and has lead to some big flash crashes, and was partly to blame for the massive SNB event. We would never have seen something of that scale on such an event if human traders had been in control.

As far as the BOE are concerned, they’ve got the green light to carry on, and so remain part and parcel of everyday trading, and that’s something we’ll all have to live with, flash crashes and all.