Robert Lenzner, 02.07.08, 6:00 AM ET The stock market belongs to the quants. Some 70% of all equity volume is driven by computer models that suddenly trigger a surge in buy or sell orders that are causing the fragmentation, volatility and use of hidden trading venues. Some 30% of all trades are being done in so-called "dark pools"--37 alternative trading systems that operate like private markets--or through "dark orders"--bids or offers that are never disclosed to the public before they are transacted. Arguably, this trading activity causes violent moves up and down in a single session that intimidates ordinary investors. Take Tuesday, Jan. 22, when the Dow opened down 463 points, or 7%, in the wake of plummeting stock prices in Asia and Europe. What looked to be a frightening rout was transformed suddenly and without the slightest advance warning into a huge rally as hundreds upon hundreds of gigantic buy orders, all 1 million shares or more in size, poured into electronic trading systems at Credit Suisse and several other major trading firms. Dan Mathisson, Credit Suisse managing director and head of advanced execution services, believes these massive orders were from quant hedge funds whose algorithms suddenly decided stocks were cheap and sent out huge buy orders, all over 1 million shares each. Mathisson terms this electronic surge a "stabilizing force." More: http://www.forbes.com/2008/02/06/cr...ols-oped-cz_rl_0207croesus.html?feed=rss_news
Monkey see, monkey do, Mack. Similar to the August-2007 meltdown, too much money wants to do the same thing at the same time.
They are blowing smoke. I figured out exactly how these programs operate long ago, and can reverse engineer any pattern with less than 5 lines of code.