research-article

Federal market information technology in the post flash crash era: roles for supercomputing

Authors:

David Leinweber,

Kesheng WuAuthors Info & Claims

WHPCF '11: Proceedings of the fourth workshop on High performance computational finance

Pages 23 - 30

https://doi.org/10.1145/2088256.2088267

Published: 13 November 2011 Publication History

Abstract

This paper describes collaborative work between active traders, regulators, economists, and supercomputing researchers to replicate and extend investigations of the Flash Crash and other market anomalies in a National Laboratory HPC environment. Our work suggests that supercomputing tools and methods will be valuable to market regulators in achieving the goal of market safety, stability, and security.

Currently the key mechanism for preventing catastrophic market action are "circuit breakers." We believe a more graduated approach, similar to the "yellow light" approach in motorsports to slow down traffic, might be a better way to achieve the same goal. To enable this objective, we study a number of indicators that could foresee hazards in market conditions and explore options to confirm such predictions. Our tests confirm that Volume Synchronized Probability of Informed Trading (VPIN) and a version of volume Herfindahl-Hirschman Index (HHI) for measuring market fragmentation can indeed give strong signals ahead of the Flash Crash event on May 6 2010. This is a preliminary step toward a full-fledged early-warning system for unusual market conditions.

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Cited By

He ZJiang JKusy MTrabelsi S(2016)Volume-Synchronised Probability of Informed Trading on Chinese Index Futures: A Comparative Approach1China Accounting and Finance Review10.7603/s40570-016-0005-618:2Online publication date: 28-Jun-2016
https://doi.org/10.7603/s40570-016-0005-6
Paddrik MHayes RScherer WBeling P(2015)Effects of limit order book information level on market stability metricsJournal of Economic Interaction and Coordination10.1007/s11403-015-0164-612:2(221-247)Online publication date: 31-Jul-2015
https://doi.org/10.1007/s11403-015-0164-6
Tucker MBull J(2012)The Application of High Performance Computing to Solvency and Profitability Calculations for Life Assurance ContractsProceedings of the 2012 SC Companion: High Performance Computing, Networking Storage and Analysis10.1109/SC.Companion.2012.140(1163-1170)Online publication date: 10-Nov-2012
https://dl.acm.org/doi/10.1109/SC.Companion.2012.140
Show More Cited By

Index Terms

Federal market information technology in the post flash crash era: roles for supercomputing
1. Applied computing

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Published In

cover image ACM Conferences

WHPCF '11: Proceedings of the fourth workshop on High performance computational finance

November 2011

54 pages

ISBN:9781450311083

DOI:10.1145/2088256

Program Chairs:
Mikhail Smelyanskiy
Intel
,
Matthew Dixon
UC Davis
,
David Daly
IBM Thomas J. Watson Research Center
,
Maria Eleftheriou
IBM Thomas J. Watson Research Center
,
Jose Moreira
IBM Thomas J. Watson Research Center
,
Kyung Ryu
IBM Thomas J. Watson Research Center

Copyright © 2011 ACM.

Permission to make digital or hard copies of all or part of this work for personal or classroom use is granted without fee provided that copies are not made or distributed for profit or commercial advantage and that copies bear this notice and the full citation on the first page. Copyrights for components of this work owned by others than ACM must be honored. Abstracting with credit is permitted. To copy otherwise, or republish, to post on servers or to redistribute to lists, requires prior specific permission and/or a fee. Request permissions from [email protected]

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Published: 13 November 2011

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SC '11

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SIGARCH

SC '11: International Conference for High Performance Computing, Networking, Storage and Analysis

November 13, 2011

Washington, Seattle, USA

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Cited By

He ZJiang JKusy MTrabelsi S(2016)Volume-Synchronised Probability of Informed Trading on Chinese Index Futures: A Comparative Approach1China Accounting and Finance Review10.7603/s40570-016-0005-618:2Online publication date: 28-Jun-2016
https://doi.org/10.7603/s40570-016-0005-6
Paddrik MHayes RScherer WBeling P(2015)Effects of limit order book information level on market stability metricsJournal of Economic Interaction and Coordination10.1007/s11403-015-0164-612:2(221-247)Online publication date: 31-Jul-2015
https://doi.org/10.1007/s11403-015-0164-6
Tucker MBull J(2012)The Application of High Performance Computing to Solvency and Profitability Calculations for Life Assurance ContractsProceedings of the 2012 SC Companion: High Performance Computing, Networking Storage and Analysis10.1109/SC.Companion.2012.140(1163-1170)Online publication date: 10-Nov-2012
https://dl.acm.org/doi/10.1109/SC.Companion.2012.140
Andersen TBondarenko O(undefined)Comments on 'Testing VPIN on Big Data - Response to Reflecting on the VPIN Dispute'SSRN Electronic Journal10.2139/ssrn.2331106
https://doi.org/10.2139/ssrn.2331106
Andersen TBondarenko O(undefined)Reflecting on the VPIN DisputeSSRN Electronic Journal10.2139/ssrn.2305905
https://doi.org/10.2139/ssrn.2305905
Andersen TBondarenko O(undefined)Assessing VPIN Measurement of Order Flow Toxicity via Perfect Trade ClassificationSSRN Electronic Journal10.2139/ssrn.2292602
https://doi.org/10.2139/ssrn.2292602
Chakrabarty BPascual RShkilko A(undefined)Trade Classification Algorithms: A Horse Race between the Bulk-Based and the Tick-Based RulesSSRN Electronic Journal10.2139/ssrn.2182819
https://doi.org/10.2139/ssrn.2182819
Easley DLopez de Prado MO'Hara M(undefined)VPIN and the Flash Crash: A CommentSSRN Electronic Journal10.2139/ssrn.2062450
https://doi.org/10.2139/ssrn.2062450
Easley DLopez de Prado MO'Hara M(undefined)Flow Toxicity and Liquidity in a High Frequency WorldSSRN Electronic Journal10.2139/ssrn.1695596
https://doi.org/10.2139/ssrn.1695596
Wood RUpson JMcInish T(undefined)The Flash Crash: Trading Aggressiveness, Liquidity Supply, and the Impact of Intermarket Sweep OrdersSSRN Electronic Journal10.2139/ssrn.1629402
https://doi.org/10.2139/ssrn.1629402

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