Why should currencies move a far greater amount than usual in a short space of time, for no apparent reason and then more or less return to their norm?

This situation is beginning to occur far more frequently than in the past and as with everything in the financial world no-one is ever to blame

Yes, liquidity plays a large part with the imposition of tougher banking requirements but so do algorithms and automated computer high frequency traders (HFTs) which can trigger excessive movement and compound each other

However, why is the concept of market manipulation limited to individual traders / organisations and surely it should be applied to computer models as well or the organisations that run them? There maybe bugs or glitches in the software but no-one has yet managed to explain why this exonerates either the developer or the underlying organisation from ultimate responsibility or even why they should not pay the penalty for what is clearly market manipulation

After all someone has coded the computers to react in a certain way and without ‘fail-safes’ they effectively get into a position where the computer code does indeed manipulate the market for financial gain and furthermore they feed on each others decisions thereby compounding the issue very quickly

For the future this is inevitably the way forward for ‘hackers’ – why bother to go for ‘penny-ante’ ransom hacks when targeting the Forex market by getting systems to place fake/dummy trades can reap huge rewards

Better still if you can get your computer to trigger a knock on effect with the market makers systems the sky is the limit. Simply get your systems to find the trigger points in the ‘algo’ computers and let them do all the work – furthermore, by triggering someone else’s systems to do the dirty work you probably won’t even get found out

Don’t do it too often because that is one way of being found out, but once every 6 months should fund a nice lifestyle

So the message seems to be clear – write systems that ascertain the ‘algo' systems triggers and then use these loop holes to exploit the market using the HFT's own applications to do the work for you

And don’t forget the underlying message that nobody is at fault ‘.. it was a computer that done it – your honour ..’! - and I have no idea how the computer code got written

Tags: | Categories: Currency | Forex