The recent flash crash in the gold market, first reported by ValueWalk on January 6, is now being attributed to an intentional high frequency trading (HFT) algorithm and not a “fat finger” mistake, according to Eric Hunsader, founder of market software firm Nanex LLC. In this flash event the price of gold dropped over $30 in one second, a rare move indeed given the history of the gold market. Hunsader estimates the value of the trades in question at $500 million.
Mr. Hunsader's key insight is the fact that the trading algorithm paused during the $30 move and then continued its selling. In other words, it wasn’t a fat finger hitting the sell button once, but rather the finger hitting...
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