Thursday, October 18, 2012

Google Stop Per Regulations

Google had a PR snafu and announced earnings intraday. This caused a big price move of 10%, and then a price freeze for about 2 hours per US regulations.

To think this had any help on generating a more efficient market is absurd. This disruption wasn't horrible but highlights the futility of trying to do good: such regulations always ends up something really dumb that just annoys everyone in the know.  


Jordan said...

I disagree. I'd say the price freeze didn't really hurt anything too much, and far better to have occasional price freezes than trades being arbitrarily broken ex-post by the exchanges.

Mercury said...

I thought GOOG requested the halt first? In any case it was down 10% and now the short ban is on too. I’m not a big fan of extended halts or even halts in general but at this point I can understand how interested parties would be concerned about how the algo-bots might react to something like this (especially going into expiration and the ‘87 anniversary!). This also stems from my larger contention (which I’m sure EF would take issue with) that our current, fragmented market structure dominated by tech fire power has resulted in a step backward in terms of market transparency and price discovery.

On the other hand the broader market bounced after the GOOG shock and it looks like the VWAP programs continued to chug along so who knows what might have been otherwise. But that’s the point - I wish there hadn’t been a halt –except maybe a very brief one. A broader or chain reaction disaster shouldn’t have resulted from bad but not terrible company specific news and if it did the culprit could have been identified and dealt with and the market could have been improved. Instead we may have missed an opportunity to learn something and the belief that something drastic will happen (but we don’t know what or why) if we don’t have these kinds of time-outs is reinforced. And that kind of uncertainty or superstition probably isn’t good.

And Jordan – the goal should be to have a market where you don’t or won’t break trades arbitrarily ex-post (like we used to have actually). That kind of thing is embarrassing and pathetic because it implies that the market isn’t functioning properly or that there are a bunch of weak links and loose seams hidden in the works that aren’t being properly addressed - which among other things saps confidence.