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Flash Crash & Systemic risk interview: Andrew Morgan, Head of Autobahn Equity Europe at Deutsche Bank

Published in Automated Trader Magazine Issue 18 Q3 2010

The so-called ‘flash crash’ on 6 May 2010 briefly wiped $1 trillion off US market capitalisation, and caused no shortage of heated debate and finger pointing.  Bob Giffords, independent banking and technology analyst, talks to Andrew Morgan of Equity Europe at Deutsche Bank.

Andrew Morgan, Head of Autobahn Equity Europe at Deutsche Bank

Have we created too much diversity and complexity in our market infrastructure thereby increasing systemic trading risks? Should we not, perhaps, exclude some areas from competition, such as tick sizes or volatility limits, just to make markets more tractable without sacrificing competition, innovation and efficiency? Andrew Morgan suggests that an appropriate level of consistency across the various pools of liquidity is vitally important, if the extreme dynamics of the flash crash are to be avoided in future. He explains how Europe's volatility controls offer some advantages over the American model on the 6 May, but here too identifies inconsistencies that may harbour complexities and risks that need to be addressed.

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Watch the video for Andrew Morgan's view on the need for a more regular review of the technology risks emanating from superfast trading to ensure a rich toolkit of regulatory safety features to reduce the likelihood of crashes, as is common practice in the car industry. However, he is quick to reassure us that at least in respect of sponsored access, as in the UK, controls are in place to ensure that this will not be the next predictable surprise, and recognizes that rapid pace of change is ramping up the need for market expertise.

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