Flash Crash of USD, thoughts?

[mdkb]

“On March 18, 2015 between 4:02 and 4:09 PM Eastern Daylight Time, the U.S. Dollar flash crashed, losing over 3% of its value in just under 4 minutes, then gaining most of it back over the next 3 minutes. This event occurred 4 minutes after the regular session of stock market trading closed on the NYSE and Nasdaq at 4 PM (16:00). Two hours earlier, at 2 PM, was the widely anticipated and watched Federal Open Market Committee (FOMC) event. A quarter of a second after the initial 2 PM announcement, the U.S. stock market exploded higher. At the same time, the U.S. Dollar moved sharply lower, setting up conditions for the flash crash 2 hours later.” taken from

http://wallstreetonparade.com/2015/03/shhh-we-cant-talk-about-the-dollars-flash-crash-on-wednesday/

I have yet to see anyone provide a good explanation of what happened. anyone got some thoughts on it?

 

[Bintang]

I have yet to see anyone provide a good explanation of what happened. anyone got some thoughts on it?

There's some commentary at Zerohedge here:http://www.zerohedge.com/news/2015-...hed-i-haven’t-seen-anything-it-financial-cris

But I don't think it qualifies as 'good explanation'. Just opinion.
However, someone must have made a lot of money and someone else must have lost it.

 

[DeepState]

There's some commentary at Zerohedge here:http://www.zerohedge.com/news/2015-...hed-i-haven’t-seen-anything-it-financial-cris

But I don't think it qualifies as 'good explanation'. Just opinion.
However, someone must have made a lot of money and someone else must have lost it.

The issue highlighted in the note relating to lack of inventory buffer is real. It is a concern for the RBA and various central banks. It is thought to be behind a flash crash of US bonds last year as well.

In trying to limit casino activities in banking by making capital allocation to capital markets trading so expensive, the regulators are making other activity more risky. Yet again, risk just transforms to a new form. Such activity has been moved into hedge funds now.

This type of stuff makes me wonder how wide stops should be set. The number of times that a stop would have been hit by something like this, only to see the position revert sharply makes things tough when determining the right kind of risk management activity to undertake.

Can you believe what we have just seen? The biggest single instruments by liquidity, the USD (recently) and US bonds (before), each gapped materially and reverted shortly afterwards - indicating a liquidity event. I had a meeting earlier in the year with an ex-IMF guy who now works at one of the world's biggest bond/asset management firms. He was a lead author of prior Global Financial Stability reports...the type that is meant to be all over this. Months after the event, it was clear that no-one knew what really happened either. The conjectures were basically speculation. There is a canary in the coal-mine that is looking a little worse for wear.