Tue Jun 5, 2007 2:06PM EDT
By Kevin Plumberg
NEW YORK (Reuters) - As investors increasingly use hyper-fast computer programs to trade, financial market regulators have begun using similar software, fearing that if misused the technology could have dire consequences.
The use of algorithms, or algos, to make complex decisions and place thousands of orders in milliseconds has grown in popularity, particularly among equity and currency dealers.
But the combination of heavy order volume from high frequency investors and the rapid pace of trading has created fertile ground for mercenary-like dealers who use technology and aggressive tactics to steamroll rivals.
Market regulators are eyeing the potential risks closely.
"The greatest difficulty with tracking these systems is the risk management aspect," said Edward Dasso, director of trade practice and market surveillance at the National Futures Association, a self-regulatory organization for the U.S. futures industry.
"They can pump in more orders per millisecond than a person can, so there's always the concern that they can melt a firm and blow it up in a matter of seconds," Dasso said.
More: http://www.asia.reuters.com/articlePrint?articleId=USN2139129320070605
Another article, same author:
"FX market braces for rise of algorithms"
http://www.reuters.com/articlePrint?articleId=USN0329446620070404
By Kevin Plumberg
NEW YORK (Reuters) - As investors increasingly use hyper-fast computer programs to trade, financial market regulators have begun using similar software, fearing that if misused the technology could have dire consequences.
The use of algorithms, or algos, to make complex decisions and place thousands of orders in milliseconds has grown in popularity, particularly among equity and currency dealers.
But the combination of heavy order volume from high frequency investors and the rapid pace of trading has created fertile ground for mercenary-like dealers who use technology and aggressive tactics to steamroll rivals.
Market regulators are eyeing the potential risks closely.
"The greatest difficulty with tracking these systems is the risk management aspect," said Edward Dasso, director of trade practice and market surveillance at the National Futures Association, a self-regulatory organization for the U.S. futures industry.
"They can pump in more orders per millisecond than a person can, so there's always the concern that they can melt a firm and blow it up in a matter of seconds," Dasso said.
More: http://www.asia.reuters.com/articlePrint?articleId=USN2139129320070605
Another article, same author:
"FX market braces for rise of algorithms"
http://www.reuters.com/articlePrint?articleId=USN0329446620070404
