For kimwoods

Background

Emergence of high speed trading (HST)

p.1 ¶4

Baumann

Definition of HST

p.2 ¶1-2

Baumann/WSJ

Unknown algorithm uses up 10% of bandwidth

p. 6 ¶3

Baumann/Leinweber

Examples of Actual Events

Knight episode; unknown source causes price fluctuation

p.1 ¶1-3

Baumann

“Flash Crash”; events of May 6 2010; crazy fluctuation

p.4 ¶3 to

p. 5 ¶2

Baumann/WSJ

Unknown algorithm uses up 10% of bandwidth

p. 6 ¶3

Baumann/Leinweber

*“Quote stuffing”

p. 4 (graph)

Baumann

Factors which Exacerbate Risks

Regulation lags behind development in tech

p.2 ¶ 3-5

Baumann/Greenberger

No human judgment

p.4 ¶1

Weisenborn

Cancelled orders/Fake trades manipulate market

p.4 ¶2

Baumann

Congressional inaction; no oversight

p.5 ¶3-5

Baumann/Schapiro

Regulators behind technologically/No real-time data

p.5 ¶6-7

Baumann/Leinweber

Regulators: no RT data (continued)

p.6 ¶2

Berman

*Dodd-Frank act sidestepped problem; Old regulatory mechanisms

p.6 ¶6-7

Baumann

Financial industry usually opposes regulatory change

p.8 ¶1

Baumann

Possible Future Problems

Chance of “rogue software” at massive bank

p.2 ¶ 5

Black

Next crisis could “take seconds”

p.2 ¶ 6

Baumann

Possibility of intentional disruption (criminals/terrorists)

p.6 ¶4

Baumann/Bates

Humans might avoid responsibility for stopping trading

p.7 ¶2

Baumann/Black

CEOs worry about possible damage to stock values

p.7 ¶6-7

Baumann/CEO/Willis

*Technology dangerous in wrong hands

p.8 ¶2

Greenberg