Sniffing out stop loss orders has been around as long as stop loss orders.Nonc Hilaire wrote:Agree on market closing but not circuit breakers. Those limit damage from the hft crowd from sniffing out stop loss orders and then capitalizing on the phony price cascade.Typhoon wrote:FT | Chinese shares plunged on the first trading session of the new year, with the Shenzhen market suffering its worst day in nine years and the blue-chip CSI 300 index slumping 7 per cent on weak manufacturing data, triggering newly minted circuit breakers.
The purpose of a market is price discovery.Monday’s slide came after an official factory survey showed China's manufacturing sector shrank for a fifth consecutive month in December.
Investors were also nervous about the imminent expiration of a ban on stock sales by large shareholders, imposed at the height of last year’s market meltdown.
So-called circuit breakers and bans on stock sales only interfere with this process and can lead to additional panic.
Such actions are not unlike locking the doors in an auditorium after someone yells "Fire".
I don't think that HFT has much to due with today drop. More likely the usual "Sell, Mortimer, sell" and get me out at any price panic.
It is not clear to me that closing the markets is the way to proceed.