Central banks investigating whether computer programmes or an individual triggered October's sterling "flash crash", the latest to hit a major financial market, may consider computerised stabilisation programmes as a possible response. The Financial Times reported on Wednesday that officials were looking at flows through a Tokyo-based trader at US bank Citi as they search for what caused the brief but dramatic 10 percent crash in sterling.
Citi said in response that its trading operations had functioned appropriately in a thin and illiquid market. The FT report said the trader is not believed to have started the slide that sent the pound to a 31-year low but might have exaggerated it by placing a number of 'sell' orders after a sudden price shift at an hour when activity is typically quiet. Whatever the extent of human decision-making in the crash, investigators are convinced algorithm-driven machine trading was at least one major factor in what occurred.
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