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TradeTech 2012: How the not so nutty professor stole the show

TradeTech, Europe’s largest financial services technology trade show, seems to come around faster than a high frequency trading platform going into overdrive. More so than in recent years, the dark shadow of pending regulation, such as the European Market Infrastructure Review (EMIR), was very much a key talking point throughout the conference. While the full details of EMIR are yet to be defined, the very thought around proposals to regulate the post trade clearing process of over the counter (OTC) derivatives was enough to flatten the champagne for traders.

However, while EMIR was clearly at the front of everyone’s minds, from a PR and communications stand point, it was professor Dave Cliff’s revelations that flash crashes happen on a “frequent basis” that really turned heads and got people talking. Well over two years have passed since the Dow plummeted over 650 points in half an hour, wiping close to 9 billion dollars off share prices, before rebounding to regain almost 10% of its value within minutes. In a presentation of great intellectual detail, Cliff argued that various securities have experienced "flash crashes" since, losing a large proportion of their value, and regaining it just as quickly. He went on to explain how smaller, but still important versions of what happened in May 2010 are still a regular market occurrence. Cliff explored how traders are still seeing individual stocks and exchange traded funds (ETFs) suffering flash-crash-like events, when stocks fall suddenly for no reason and quickly rebound, suggesting many of the underlying problems are yet to be addressed.

As we know from the many press articles and social media noise, it is still inconclusive to what directly caused the original flash crash, with high frequency, fat finger and rogue trading all speculated since 2010. What we have learnt from Cliff, a former foreign exchange risk group director for Deutsche Bank, is that the debate has moved away from looking at the flash crash as an isolated incident. While his speech did little to provide any concrete answers to stopping future flash crash style events from happening, it certainly made everyone at TradeTech 2012 stand up and take note, which can’t be a bad thing. As a result, we just might start witnessing some long overdue fresh flash crash debates taking place, opening up real news hijacking opportunities for PR firms representing vendors in the trading technology sector. The original flash crash shows that the vendors, particularly those providing market surveillance solutions, who are quickest to provide an opinion on the debate will be the ones to drive conversation in the key business publications.