Market Meltdown Still Does Not Compute

By Michael Feldman

May 13, 2010

Although it’s been a full week since the stock market’s 1,000-point plunge and rebound, so far the sharpest minds on Wall Street still haven’t figured out exactly what caused it. At this point, the best guess is that, yes indeed, high frequency trading was involved, but perhaps not in the way most people were led to believe.

Although no one is really sure what set off the stock market calamity, some analysts have started to piece together the chain of events that spread panic for 10 minutes last Thursday before order was restored. According to a New York Times piece, the main cause was the disparity in how technology is allowed to operate across different exchanges.

After a weekend of analysis, many specialists at the major exchanges no longer believe that a single large sell trade in one stock, like that of Procter & Gamble, was the trigger, according to the people familiar with the investigation. Instead, they suspect that a mismatch in rules between the older New York Stock Exchange and younger electronic exchanges set off a frightening sequence of events.

Here’s how it supposedly went down: When the market plunge began, the NYSE powers that be decided to curtail most computer-based trading. That flooded the market with sell orders, and since the computers were offline, those orders just backed up. This forced the sellers to look for buyers on the newer exchanges where electronic trading was still going on. By then, the sell pressure had built up too much, further accelerating the market dive on these secondary exchanges. When the feedback loop had run its course, the algorithms kicked in again and started buying up the bargain-priced shares, restoring most of the lost market value.

In an article in the Wall Street Journal, Tomi Kilgore talks about how the investors have become dependent on “super-fast execution” to do their trades. But, he warns, that level of latency has its pitfalls. Kilgore writes:

One problem with machines is that some will trade on the next best available price, however erroneous that price might be. Ironically, how fast a trade can be made isn’t necessarily the best thing for a client during a “fast market.”

The market meltdown has managed to encourage some serious navel-gazing among the Wall Street set. For example, Michael Durbin at the New York Times, thinks that high frequency trading is fine and dandy, he does want to see some tighter regulations to ensure the computer systems don’t run amok. Essentially, he’s lobbying the SEC for greater transparency. And then there’s the software itself:

Indeed, the rapid development of automated-trading software and the maddening complexity of even the most simple systems make the introduction of technological errors inevitable. While it’s true that electronic exchanges require trading software to be certified before it is used, there is no market-wide standard for testing the software and nothing to effectively stop a firm from trading with uncertified software.

Meanwhile, David Weidner at MarketWatch seems to want to break Wall Street of its supercomputing habit. He’s not blaming the hardware or the algorithms per se, just the ability of people to use them for the greater good. He writes:

That’s why the claims by the high-frequency crowd that their beloved computers are benign are disingenuous. Yes, the computers are benign, except when placed in the hands of traders under tremendous pressure to maximize returns for the investors they serve.

My take on this matches pretty closely with Weidner’s. Skimming pennies off of millions of trades is probably not society’s optimal use of supercomputers and high-speed interconnects, especially considering the rather questionable role of these systems in improving market liquidity. Maybe more sobering is the fact that a week after the market meltdown, there’s still no complete explanation of how it happened. And if no one understands the interactions between the computers and the humans that run the markets, how does the system get fixed?

Subscribe to HPCwire's Weekly Update!

Be the most informed person in the room! Stay ahead of the tech trends with industy updates delivered to you every week!

TACC Researchers Test AI Traffic Monitoring Tool in Austin

December 13, 2017

Traffic jams and mishaps are often painful and sometimes dangerous facts of life. At this week’s IEEE International Conference on Big Data being held in Boston, researchers from TACC and colleagues will present a new Read more…

AMD Wins Another: Baidu to Deploy EPYC on Single Socket Servers

December 13, 2017

When AMD introduced its EPYC chip line in June, the company said a portion of the line was specifically designed to re-invigorate a single socket segment in what has become an overwhelmingly two-socket landscape in the d Read more…

By John Russell

Microsoft Wants to Speed Quantum Development

December 12, 2017

Quantum computing continues to make headlines in what remains of 2017 as tech giants jockey to establish a pole position in the race toward commercialization of quantum. This week, Microsoft took the next step in advanci Read more…

By Tiffany Trader

HPE Extreme Performance Solutions

Explore the Origins of Space with COSMOS and Memory-Driven Computing

From the formation of black holes to the origins of space, data is the key to unlocking the secrets of the early universe. Read more…

ESnet Now Moving More Than 1 Petabyte/wk

December 12, 2017

Optimizing ESnet (Energy Sciences Network), the world's fastest network for science, is an ongoing process. Recently a two-year collaboration by ESnet users – the Petascale DTN Project – achieved its ambitious goal t Read more…

AMD Wins Another: Baidu to Deploy EPYC on Single Socket Servers

December 13, 2017

When AMD introduced its EPYC chip line in June, the company said a portion of the line was specifically designed to re-invigorate a single socket segment in wha Read more…

By John Russell

Microsoft Wants to Speed Quantum Development

December 12, 2017

Quantum computing continues to make headlines in what remains of 2017 as tech giants jockey to establish a pole position in the race toward commercialization of Read more…

By Tiffany Trader

HPC Iron, Soft, Data, People – It Takes an Ecosystem!

December 11, 2017

Cutting edge advanced computing hardware (aka big iron) does not stand by itself. These computers are the pinnacle of a myriad of technologies that must be care Read more…

By Alex R. Larzelere

IBM Begins Power9 Rollout with Backing from DOE, Google

December 6, 2017

After over a year of buildup, IBM is unveiling its first Power9 system based on the same architecture as the Department of Energy CORAL supercomputers, Summit a Read more…

By Tiffany Trader

Microsoft Spins Cycle Computing into Core Azure Product

December 5, 2017

Last August, cloud giant Microsoft acquired HPC cloud orchestration pioneer Cycle Computing. Since then the focus has been on integrating Cycle’s organization Read more…

By John Russell

GlobalFoundries, Ayar Labs Team Up to Commercialize Optical I/O

December 4, 2017

GlobalFoundries (GF) and Ayar Labs, a startup focused on using light, instead of electricity, to transfer data between chips, today announced they've entered in Read more…

By Tiffany Trader

HPE In-Memory Platform Comes to COSMOS

November 30, 2017

Hewlett Packard Enterprise is on a mission to accelerate space research. In August, it sent the first commercial-off-the-shelf HPC system into space for testing Read more…

By Tiffany Trader

SC17 Cluster Competition: Who Won and Why? Results Analyzed and Over-Analyzed

November 28, 2017

Everyone by now knows that Nanyang Technological University of Singapore (NTU) took home the highest LINPACK Award and the Overall Championship from the recently concluded SC17 Student Cluster Competition. We also already know how the teams did in the Highest LINPACK and Highest HPCG competitions, with Nanyang grabbing bragging rights for both benchmarks. Read more…

By Dan Olds

US Coalesces Plans for First Exascale Supercomputer: Aurora in 2021

September 27, 2017

At the Advanced Scientific Computing Advisory Committee (ASCAC) meeting, in Arlington, Va., yesterday (Sept. 26), it was revealed that the "Aurora" supercompute Read more…

By Tiffany Trader

NERSC Scales Scientific Deep Learning to 15 Petaflops

August 28, 2017

A collaborative effort between Intel, NERSC and Stanford has delivered the first 15-petaflops deep learning software running on HPC platforms and is, according Read more…

By Rob Farber

Oracle Layoffs Reportedly Hit SPARC and Solaris Hard

September 7, 2017

Oracle’s latest layoffs have many wondering if this is the end of the line for the SPARC processor and Solaris OS development. As reported by multiple sources Read more…

By John Russell

AMD Showcases Growing Portfolio of EPYC and Radeon-based Systems at SC17

November 13, 2017

AMD’s charge back into HPC and the datacenter is on full display at SC17. Having launched the EPYC processor line in June along with its MI25 GPU the focus he Read more…

By John Russell

Nvidia Responds to Google TPU Benchmarking

April 10, 2017

Nvidia highlights strengths of its newest GPU silicon in response to Google's report on the performance and energy advantages of its custom tensor processor. Read more…

By Tiffany Trader

Japan Unveils Quantum Neural Network

November 22, 2017

The U.S. and China are leading the race toward productive quantum computing, but it's early enough that ultimate leadership is still something of an open questi Read more…

By Tiffany Trader

GlobalFoundries Puts Wind in AMD’s Sails with 12nm FinFET

September 24, 2017

From its annual tech conference last week (Sept. 20), where GlobalFoundries welcomed more than 600 semiconductor professionals (reaching the Santa Clara venue Read more…

By Tiffany Trader

Google Releases Deeplearn.js to Further Democratize Machine Learning

August 17, 2017

Spreading the use of machine learning tools is one of the goals of Google’s PAIR (People + AI Research) initiative, which was introduced in early July. Last w Read more…

By John Russell

Leading Solution Providers

Amazon Debuts New AMD-based GPU Instances for Graphics Acceleration

September 12, 2017

Last week Amazon Web Services (AWS) streaming service, AppStream 2.0, introduced a new GPU instance called Graphics Design intended to accelerate graphics. The Read more…

By John Russell

Perspective: What Really Happened at SC17?

November 22, 2017

SC is over. Now comes the myriad of follow-ups. Inboxes are filled with templated emails from vendors and other exhibitors hoping to win a place in the post-SC thinking of booth visitors. Attendees of tutorials, workshops and other technical sessions will be inundated with requests for feedback. Read more…

By Andrew Jones

EU Funds 20 Million Euro ARM+FPGA Exascale Project

September 7, 2017

At the Barcelona Supercomputer Centre on Wednesday (Sept. 6), 16 partners gathered to launch the EuroEXA project, which invests €20 million over three-and-a-half years into exascale-focused research and development. Led by the Horizon 2020 program, EuroEXA picks up the banner of a triad of partner projects — ExaNeSt, EcoScale and ExaNoDe — building on their work... Read more…

By Tiffany Trader

IBM Begins Power9 Rollout with Backing from DOE, Google

December 6, 2017

After over a year of buildup, IBM is unveiling its first Power9 system based on the same architecture as the Department of Energy CORAL supercomputers, Summit a Read more…

By Tiffany Trader

Delays, Smoke, Records & Markets – A Candid Conversation with Cray CEO Peter Ungaro

October 5, 2017

Earlier this month, Tom Tabor, publisher of HPCwire and I had a very personal conversation with Cray CEO Peter Ungaro. Cray has been on something of a Cinderell Read more…

By Tiffany Trader & Tom Tabor

Tensors Come of Age: Why the AI Revolution Will Help HPC

November 13, 2017

Thirty years ago, parallel computing was coming of age. A bitter battle began between stalwart vector computing supporters and advocates of various approaches to parallel computing. IBM skeptic Alan Karp, reacting to announcements of nCUBE’s 1024-microprocessor system and Thinking Machines’ 65,536-element array, made a public $100 wager that no one could get a parallel speedup of over 200 on real HPC workloads. Read more…

By John Gustafson & Lenore Mullin

Flipping the Flops and Reading the Top500 Tea Leaves

November 13, 2017

The 50th edition of the Top500 list, the biannual publication of the world’s fastest supercomputers based on public Linpack benchmarking results, was released Read more…

By Tiffany Trader

Intel Launches Software Tools to Ease FPGA Programming

September 5, 2017

Field Programmable Gate Arrays (FPGAs) have a reputation for being difficult to program, requiring expertise in specialty languages, like Verilog or VHDL. Easin Read more…

By Tiffany Trader

  • arrow
  • Click Here for More Headlines
  • arrow
Share This