Splash Crash
The term “flash crash” began after the sudden market drop on May 6, 2010. John Bates, the chief technology officer at Progress Software (Bedford, MA), wrote on February 1, 2011 to “Beware the Splash Crash.” The term “splash crash” was defined as “cross asset flash crashes”—a flash crash that causes a splash across asset classes even outside equities.
“Splash crash” was popularized by the CNBC article “Ready for ‘Splash Crash,’ the Ultimate Market Meltdown?” by Jeff Cox on February 2, 2011, and the Barron’s article “Next Danger: ‘Splash Crash’” by Jim McTague on May 21, 2011.
Event Processing Blog
Tuesday, February 01, 2011
Beware the Splash Crash
Posted by John Bates
We have had the flash crash, the breathtaking 1000-point drop-then-surge that happened on May 6th, 2010. In the near future we will have a new worry - prepare for the “Splash Crash”, which will cross asset barriers in a single bound.
As asset classes outside equities - energy, commodities, FX, derivatives - become increasingly automated there will be more flash crashes. Increased interdependence of asset classes will lead to cross asset flash crashes – a domino effect where the crashes ‘splash’ across asset classes, possibly wreaking havoc for market participants and regulators.
CNBC
Ready for ‘Splash Crash,’ the Ultimate Market Meltdown?
Published: Thursday, 3 Feb 2011 | 1:47 PM ET
By: Jeff Cox
CNBC.com Staff Writer
With memories of last May’s “Flash Crash” still fresh in investors’ minds, now comes warning of a market meltdown that could extend beyond stocks—a possible “Splash Crash” that also would affect currencies, commodities and bonds.
The interconnectedness of high-speed trading platforms is making such an event increasingly possible, says John Bates, chief technology officer at Progress Software in Bedford, Mass.
Barron’s
SATURDAY, MAY 21, 2011
Next Danger: “Splash Crash”
By JIM MCTAGUE
Markets are ill-prepared for a high-speed trading disruption that might simultaneously affect stocks, commodities, bonds and other assets.
Last year’s Flash Crash was a hair-raising experience for stock and commodities investors—comparable to the sudden descent of a large airliner from 38,000 feet to tree-top level, followed by an equally sudden and steep ascent.
A trillion dollars in equity vanished in minutes, as stock futures, exchange-traded funds and equities plunged. I’ve recently heard from a computer-trading expert warning of the very real possibility of a more widespread and catastrophic “splash crash,” a dislocation by high-speed trading computers that could simultaneously splash across many more asset classes and markets. Imagine our metaphorical jet buried in the earth up to its tail.
FT Alphaville
Beware the ‘Splash Crash’
Posted by Izabella Kaminska on May 23 14:52.
Introducing ‘the splash crash’.
Like the flash crash but worse because it involves the “flash” spreading cross-asset class to everything from forex to commodities.
The idea springs from John Bates, the chief technology officer of Progress Software, as cited by Jim Mctague in Barron’s this week, and the worry is that investors currently do not appreciate the level of cross-asset algo-influence in the market.
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COMMENTS
Nately | May 23 3:24pm
“Splash crash”? Sounds like my midnight pee (damned toilet seat).