back to article Robots blamed for wiping 10 per cent off the value of sterling

Algorithms have been blamed for a flash crash that wiped nearly 10 per cent off the value of sterling on Friday morning. The pound slumped to $1.18 as Asian markets opened from $1.26 the day before, falling briefly to $1.14 – a fresh, threedecade low. The fall came after French president Francois Hollande demanded a tough …

  1. Your alien overlord - fear me

    "amid fears that the UK might actually leave the EU after all" - er, don't they know?

    1. James 51 Silver badge

      I think they meant leave the EEA as well as the EU with WTO defaults in place.

      1. Charlie Clark Silver badge

        WTO defaults in place

        Only if the UK is a member of the WTO. Once it leaves the EU it will have to apply to join the WTO…

        The Tory party conference has given the currency markets plenty to worry about: the government is no longer aiming to reduce debt; access to the single market does not seem to be a priority; the Bank of England may have to choose between propping up assets and defending the currency.

        1. boltar

          "Once it leaves the EU it will have to apply to join the WTO…"

          Wrong. The UK is already a member of the WTO independent of the EU as are all EU member states. The EU is a WTO member in its own right.

          1. Charlie Clark Silver badge

            The UK is already a member of the WTO independent of the EU

            When did it manage that feat? It's been a member of the customs union longer than the WTO has been around.

            Anyway, let's just wait and see what the fools at Westminster come up with the closer they get to reality.

            1. boltar

              "When did it manage that feat? "

              For you and the 3 idiots who are apparently unable to use a search engine and modded me down I refer you to the WTO itself:

              https://www.wto.org/english/thewto_e/countries_e/united_kingdom_e.htm

              1. Anonymous Coward
                Anonymous Coward

                you keep missing sarcasm...

              2. Anonymous Coward
                Anonymous Coward

                @boltar - par for the course around here of late, I'm afraid. Even including a link to information backing your argument doesn't always do much good. Most of the knee-jerk, fact-averse downvoting seems to happen early on after an article is posted, and then later on, more considered Reg readers (presumably those with worthwhile jobs, who can't spend all day troll-modding on forums) generally come along and balance the scales a bit, if you're lucky.

                1. Kubla Cant Silver badge

                  Most of the knee-jerk, fact-averse downvoting seems to happen early on

                  It's a downvote flash crash caused by algorithmic forum reading systems.

            2. Dan 55 Silver badge

              The UK was a founder member of GATT. GATT members got migrated to the WTO.

            3. OwenMc64

              Now, while I don't believe everything I read in the Economist any more than I do all that I read in the Register, quoting the relevant paragraph from:

              http://www.economist.com/news/leaders/21708257-britains-prime-minister-must-resist-her-partys-dangerous-instincts-road-brexit

              "Amid the world’s most complex divorce, Britain’s diplomats also have another vital task. Through its membership of the EU, Britain is a member of the World Trade Organisation (WTO) and party to free-trade deals with 53 other countries. When it leaves, it will lose all that. So Britain must urgently prepare to rejoin the WTO as an individual country—which, again, requires the consent of every other member."

          2. nsld

            @Boltar

            The UK has a partial membership of the WTO with much of its common agreements dependent on membership of the EU.

            This gives a good overview from some legal experts in the field of the challenge the UK faces in re establishing full membership of the WTO if we do leave the EU/EEA/EFTA

            https://www.monckton.com/brexit-mean-uk-wto/

          3. Anonymous Coward
            Anonymous Coward

            wto

            A friend who is a civil servant (hence my AC status) and working on the implications of brexit told me yesterday that is seems we will need to reapply to join the WTO and any member could potentially veto us.

            1. Anonymous Coward
              Anonymous Coward

              Re: wto

              > that is seems we will need to reapply to join the WTO and any member could potentially veto us.

              Not true. They've explicitly said we can't 'cut & paste' EU agreements since we lack the infrastructure which manage them - so the process of creating new (statutory) UK trade bodies and agreements will effectively begin from scratch - and take many years in some cases. Nonetheless our continued and full/discrete membership is already agreed.

              "Britain is a member of the WTO and will continue to be a member of the WTO. But it will be a member with no country-specific commitments. We have had no other situation like that" (Azevêdo - WTO Head speaking in June)

              The brexit posse had zero understanding of this - for large companies the solution is simply to maintain (or build) an EU presence - for others EU shells and partner agreements will probably be the answer short-term. UK Gov currently has no idea what it will do - they're still at scoping stage and not sufficiently skilled or staffed.

      2. DougS Silver badge

        Hard Brexit is the only option

        With both France and Germany signaling that the UK will not be allowed free access to the single market, this idea that the UK can somehow negotiate a one sided Brexit that allows them to preserve the advantages of the EU while dispensing with stuff they don't want has to be considered DOA.

        I think May will chicken out due to EU countries' quite reasonable refusal to pre-negotiate terms of Brexit before notice is given. Who wants to go down in history as the PM that put the UK on an irrevocable path to national irrelevance on the world stage?

        1. imanidiot Silver badge

          Re: Hard Brexit is the only option

          @DougS, I'm pretty sure the UK was already well on it's way before the Brexit referendum.

  2. Anonymous Coward
    Anonymous Coward

    Fortunately these asinine automated trading crashes tend to get corrected pretty quickly, so the exchange rate's currently back at around 1.24. How we've let real world assets like currencies, stocks and shares be used as nothing more than casino chips in a massive gambling operation is somewhat mystifying.

    1. Charlie Clark Silver badge

      Because the markets make money on trading volumes they push for ways to do more of this and faster and lobby strongly against anything such a transaction tax that could slow it down or reduce their margins.

    2. Bronek Kozicki Silver badge

      Before this "flash crash", GBP/USD was at 1.26, now it is just above 1.23. This is huge difference, nowhere close to recovery.

      1. Wensleydale Cheese

        Seeing similar with GBP/CHF at 1.21 (11am UK time). I'm sure it was above 1.25 yesterday.

      2. Anonymous Coward
        Anonymous Coward

        Shhh.

        Stop breaking peoples gamblers fallacy oblivion.

    3. Mage Silver badge
      Alert

      crashes tend to get corrected pretty quickly,

      Except in this case it's more like a dead cat bounce.

      Sterling, on average, is going to continue to fall.

      The FTSE 100 is mostly international megacorps, so now that it's clearer what May will do, it is logically rising, nothing much to do with export of UK services and manufactured products.

      There is a short window for people to buy Sterling priced products and then there will be inflation on price of UK exports or web retail sales.

  3. Roger Kynaston
    Pint

    but but but

    We have got our country back!

    <snigger>

    Beer because we will need lots of it (real ale only of course)

    1. Charlie Clark Silver badge

      Re: but but but

      real ale only of course

      I don't think they drink much of that in Essex… hm. maybe the country could do with a rebranding "The Disunited Kingdom of Essex, Jockland and Taffyville"? Motto: "Did you spill my pint?"

    2. Paul Shirley

      Re: We have got our country back!

      ...who cares if there's just a little less of it in british hands every time the £ drops and foreigners go on a stock buying frenzy...

      1. Alan Brown Silver badge

        Re: We have got our country back!

        "every time the £ drops and foreigners go on a stock buying frenzy..."

        At some point someone will buy up Sunderland and revive the tradition of land clearance.

        1. tony2heads

          @Alan Brown

          Lands clearance suggests that you have an alternative use for it (in the clearances in Scotland it was sheep).

          What could one use Sunderland for? Wind farms?

          1. imanidiot Silver badge

            Re: @Alan Brown

            Westminster is better suited for power generation. So much hot air being generated there you could probably power the better part of the western world from it.

          2. Paul Shirley

            Re: @Alan Brown

            What could one use Sunderland for? Wind farms?

            That would just undermine efforts to send the Welsh back down the mines on workfare ;)

  4. Anonymous Coward
    Anonymous Coward

    Reports are divided on the exact cause of the system meltdown

    I read it in the beeb in the morning, and it kind of scared me, that in a human-designed, and supposedly human-controlled (?) system, nobody has a f... clue WHY some serious fluctuation happened. So is there ANY human who's in control, or at least, can PRECISELY establish the reasons? Hello, anyone there?

    I'm awaiting the day when the gov decisions get outsourced to software, cause, you know, the machines can think so much faster... Hopefully they can think faster than the machines in Russia or China, when it comes to pressing the buttons to launch our (faster?) missiles... That'll give me an edge, extra 2 seconds to reflect...

    1. Anonymous Coward
      Anonymous Coward

      Re: Reports are divided on the exact cause of the system meltdown

      The point in Automated Trading is to *NOT* have human intervention !!!

      Humans are slow, make mistakes and let emotion get in the way !!!

      The ultimate aim is to develop an algorithm (or set of) that is faster than anyone else and less likely to make mistakes than anyone else.

      These 'Micro crashes' are just teething problems on the way to 'Trading Nirvarna' :) :(

      As long as it does not get in the way of earning your bonuses, no-one in the industry cares.

      The people that make the real money are slightly inconvenienced and the 'Mug Punters' pay for it.

      It is of little note that the knock on effect is felt by the whole country and wider.

      If things get too bad you can always take your 'Trading expertise' to some other foreign climes !!!!

  5. Hans 1 Silver badge
    Happy

    >The fall came after French president Francois Hollande demanded a tough stance be taken by the EU during Brexit negotiations amid fears that the UK might actually leave the EU after all – a so-called “hard Brexit”.

    FFS, the first time I support one of his demands, seriously, I live in the country presided by this Camembert cheese excuse for human being.

    I guess, he was listening to Renaud Miss Maggie, I prefer Vega: You will never be my Maggy May.

    As for the citizens of Britain, good luck, it pans out as I predicted and you are entering one kind of a shit-hole and that for the next 20 years ... take a deep breath now, you'll need it soon ;-)

    Brexiters: Rira bien qui rira le dernier! Großbritannien ? Griff ranschweißen und wegschmeißen!

  6. Whitter
    Boffin

    High frequency trading

    High frequency trading: what true value does it bring as opposed to paper-only gains?

    An impossibility I'm sure, but I'm sure that slowing down trading stocks/shares rather than speeding them up might bring the useful pressure to "know what the hell you are buying/selling".

    1. Richard 12 Silver badge

      Re: High frequency trading

      Arbitrage basically.

      It closes down the magic money tree circles where you can buy from X and instantly sell to Y at a profit.

      1. kmac499

        Re: High frequency trading

        Buy from X and sell to Y in the nanoseconds before Y realises what you paid for it and you get your 1/1000% profit. Which means in order to make it worthwhile getting out of bed for, you have to sell gazillions to make a few measly million..

        I'm all for people buying and selling stuff to each other but if there was ever a case for the Tobin Tax High frequency trading is it. Can I suggest as a possible twist the rate of tax is inversely proportional to the length of time you hold the assets. so the longer you hold'em the less tax you pay.

  7. David Pollard

    Who was buying?

    Someone made a packet.

  8. amanfromMars 1 Silver badge

    NEUKlearer HyperRadioProActive IT ..... is not a Trifle

    Blame who or whatever you will, but it is surely cold comfort whenever it is neither a mistake nor accident in a greater master plan with remote controlled command operations .... with unfolding series of Immaculately Machined and Advanced IntelAIgently Designed proactions ......... http://www.ur2die4.com/161007-2/

    And Perfect AI Stealth is delivered in it being generally and widely believed and perceived as practically impossible.

  9. Doc Ock

    Don't you just love how economists present their profession as an exact science.

    A butterfly's wings.

  10. Alan Brown Silver badge

    "The Tory party conference has given the currency markets plenty to worry about: "

    Exactly that, and currencies are only worth what the market confidence in them is. It didn't matter that the new Roman coins had more silver in them around 440AD than previous issues. People took one look at them, then at the old ones and within 18 months roman currency was valueless as no-one would accept it.

    Flash crashes happen because people game algorithms to try and gain an advantage (the algorithms are in turn setup by people who might be good at statistical analysis, but they don't know all the inputs, and the people using the algorithms know just enough about them to clock-n'drool), OR because something is genuinely overvalued and once the bubble starts to burst the automated activity rapidly drives the trade values back down to "actual" levels.

    After WW2, "British made" became a codeword for "shonky designs-by-committee using the cheapest possible supplies regardless of quality and put together by badly treated workforces using century old production tools" (literally that old in many cases) - the epitome of this being British Leyland. That's why people of the "empire" stopped 'buying british' unless forced to by their governments. Even though the quality has changed, memories are very long - as GM found when it tried to resurrect the Vauxhall brand in Australia/New Zealand.

    The only thing that's been keeping the value of the pound high over the last 4 decades is the financial services industry. When that industry lost confidence in its home base - it has, and all the orgs are already moving their bases out of the UK - the pound lost a vital support base. Its remaining value comes from exports by its manufacturers - who mostly happen to be the car industry and also spooked into moving out. Commissar May could stand up tomorrow and say that Brexit is cancelled but it's already too late.

    But never mind. At least we got that £350million to spend on the NHS, didn't we?

  11. Stern Fenster

    I understand why, for practical reasons, we have to pay attention to the value of sterling. I understand that certain people will be attracted to all that money that is available through currency speculation. What I don't understand is why we should take these pathetic little brain-dead gamblers as an indicator of anything at all about the state of the world beyond their own self-entitled fantasy bubble.

    1. Hans 1 Silver badge
      Facepalm

      >What I don't understand is why we should take these pathetic little brain-dead gamblers as an indicator of anything

      Is the UK self-sufficient ?

      Import prices go up when pound tanks ... and it has not finished tanking, believe me! Soon, when you will want to buy, say, a MilyWay, it will be a tenner ... your salary will not increase, of course ... you will then think "Ohhhh, lets produce and export goods then, we are competitive" ... and somebody smart will ask: "Where are your factories?" and you will answer, "Oh, we trashed them in the 70's and 80's, but it's OK, because we compensate with the financial sector!" to which the smart guy will reply "Which financial sector? We just annihilated that one with Brexit!".

      DISCLAIMER: I do not care either way (in terms of Brexit), I just think it is hilarious how you guyz have STILL not realized that you are in deep shit ... I live abroad and all this does not affect me, I DON'T CARE!

      1. Hans 1 Silver badge
        Happy

        Looking forward to buying my MayFair flat for peanuts, thanks folks!

        1. Richard 12 Silver badge

          You won't be able to afford the peanuts

          Peanuts are imported...

          1. lukewarmdog

            Re: You won't be able to afford the peanuts

            I stockpiled some value peanuts from Tesco earlier in the month.

            Now my choices are to eat them as a high protein snack or to keep hold of them against the day that London property that I want becomes available.

            Or the apes rise up. Damn these difficult decisions.

            *munches peanuts to alleviate stress*

            *goes to Tesco to buy more peanuts*

            1. Duffy Moon

              Re: You won't be able to afford the peanuts

              I thought you were about to say that you were going to hitch a lift with some passing Vogons.

          2. Hans 1 Silver badge
            Coffee/keyboard

            Re: You won't be able to afford the peanuts

            >Peanuts are imported...

            I l i v e a b r o a d !

            Upvoted!

      2. Aitor 1

        Well, it does affect ME. And I could no vote (bloody foreigner that mantains NEDs, politicians and private monopolies).

        I cannot describe properly how pissed I am at the situation, BREXIT has cost me more than 30.000£ to date, and counting. On top of that, I have to endure xenphobia. At least I am white, blonde and green eyed..

        1. Anonymous Coward
          Anonymous Coward

          @Aitor 1

          I'd quite happily give you the thirty quid and let you sod off to where you came from.

          Or do you mean £30,000? In which case you might want to lean how to write to write numbers in English.

          1. Hans 1 Silver badge

            Re: @Aitor 1

            >Or do you mean £30,000? In which case you might want to lean how to write to write numbers in English.

            Ever heard of "locales" ?

            You are, what is commonly known as, a TOTAL CUNT! See that window, there, Yes, that one, open it and jump, please, thanks, you are now a hero ... while you are falling!

          2. Dan 55 Silver badge

            Re: @Aitor 1

            I do apologise for the AC, he's a bit of a twat. He probably typed that by accident while chewing the keyboard anyway.

        2. lukewarmdog
          Joke

          You have the weirdest eye colour.

          Mine are just blue.

      3. Hans 1 Silver badge

        >"Which financial sector? We just annihilated that one with Brexit!".

        For those of you who do not understand this: A hard Brexit means the financial sector will move elsewhere (Paris, Frankfurt, Rome ... wherever in EU-land) ... you will shortly lose roughly 30 to 40% of your GDP, seriously, IT IS THAT BAD ... I told you, The World Won't Listen (The Smiths)....

        Don't believe me ? Look up "passporting rights", that was why the banks were in the UK ... hard Brexit means "no passporting rights" ...

        Do I need to add another disclaimer ? Check my handle, look up there ... I do not care what you do ... :D

        1. Rob D.
          Pint

          @Hans 1.

          Don't know whether to up vote for clarity of thought or down vote for the bout of depression it brings on. Never mind. Have a beer - warm British beer we'd like to export to our European friends at very reasonable prices.

      4. Anonymous Coward
        Anonymous Coward

        "I live abroad and all this does not affect me, I DON'T CARE!"

        My company imports - though it seems not for much longer. When we stop importing that will have consequences for those who export to us.

        Perhaps you should care. These Brexit ripples will run wide.

        1. Hans 1 Silver badge

          > When we stop importing that will have consequences for those who export to us.

          > Perhaps you should care. These Brexit ripples will run wide.

          Maybe, but, seriously, why are you "importing" in the first place if British produce can fill your needs ? Oh, that's right, there is no British-made produce that fills your needs ...

          So, mate, look for another job, NOW, seriously, it is THAT BAD ... "Maggy" May has something planned, and it surely does NOT look good for you ...

          We export to the UK and we have ZERO UK competitor, so we will gladly say: "Pound tanked, this is the new price, ohh thanks!"

        2. Alan Brown Silver badge

          "My company imports - though it seems not for much longer. When we stop importing that will have consequences for those who export to us."

          Losing the UK is a tiny drop in the market.

          And my experience with UK-based companies which set themselves up as EMEA agencies is that they rip the hell out of everyone in the entire EU (EG: serverlifts - $13k in the USA and £15k here) whilst their dutch/german counterparts have more reasonable markup policies. I think it will be very good for a lot of companies if they have to find new EMEA partners outside the UK and even better for UK customers if the UK ones lose that agency status entirely.

    2. Anonymous Coward
      Anonymous Coward

      You're an idiot then

      We import more than we export by a seriously large amount ..

      eg oil .. which has doubled in price in last few months and is now 30+% more expensive again due the pound's fall against the dollar

      or any time you buy a vegetable out of season in tesco..

      Or if you work for / run a business whose costs are in dollars or rupees (ie any tech business with aws hosting and indian developers) with clients paying in pounds you dealing with serious financial shock already

      flash crash is an irrelevance and sideshow .. if you run an enormous trade defecit with the rest of the world like we do .. it has be paid for in some way .. for the uk it has been balanced by taking the largest share of FDI in the EU for years. That is now over. Plus our financial services exports and related professional services exports which are massive are going to be hit badly.

      The only way for things to balance out is for the currency to depreciate which it is ....

      This is why people far smarter than you have been forecasting parity with the Euro an £1:$1.15 rate But of course, they are just evil metro-sexual global elites ... WTF do they know

      This is a massive systemic financial shock - inflation will rise or any importer will get be crucified

      Dumb ***ks like you voted without any thought for the economic consequences and now the minority of us with a brain are buggered...

      All those brexiters crowing on about how great it all is and how nothing bad is going to happen economically and how wrong the "experts" were are dumb ***s or disingenuous nobs (the farages and boris's are the latter and they are too rich to care) - we have just been in the phoney war period before the blitz.

      thx and don't have a nice weekend

  12. Jason Hindle

    It's showing little sign of recovery

    Had the issue been purely algorithmic, I think the pound would be back up a little by now. Perhaps the algorithms were pretty well aligned with market sentiment?

    Love the headlines on the strength of the FTSE, which the Brexiteers prefer to focus on (valued, of course, in a currency that is worth less than yesterday)...

  13. phuzz Silver badge
    Terminator

    "Robots blamed for wiping 10 per cent off the value of sterling"

    Teresa May is actually the Terminator: Confirmed.

  14. lukewarmdog

    ""Robots blamed"

    If only they'd had a robots.txt installed on the servers, a cautionary tale from Frank Herbert about how we mustn't hand over control of our currencies to the machines as they'll just use it to take down humanity from the inside. After all, he who controls the stock exchange selling the spice, controls the spice. And the Universe.

  15. David 155

    Good grief, cant we just get on with our lives without them being affected by these gamblers?

  16. Mystic Megabyte Silver badge
    Stop

    The UK is finished :(

    Now that the Tory party has become UKIP it has confirmed my belief that Teresa May is a swivel eyed loon.

  17. The obvious

    Gambling is based on the probability of both profit and loss. Loss was the only thing on the cards in a leave win, yet May and friends either haven't realised that yet or they are scared some racist dickheads might get violent.

  18. phil dude
    Pint

    john oliver...

    Good old John in an interview was asked his opinion of Brexit and he said "if they had only waited a few months perhaps the EU would have fallen apart, but as it is the rest of Europe is desperate to make Britain the bad guy for moving first" or something like that.

    Put simply, the media is massively biased but also fundamentally bandwidth limited. The EU cannot afford to lose Britain, as there are only 2 1/2 big countries (France, Germany and Italy/2 ) paying for all the other small countries - including the other ones lining up to join. Britain will also have a difficult time disentangling from the EU. The real answer is somewhere in the middle....love/hate/need is all in the mix. It's still not clear the PM has the authority to invoke the leave action; is it?...

    It's all a bit fantastical.....

    The southern countries with borders facing the middle east have unprecedented numbers of refugees/migrants and no infrastructure to absorb them (don't forget youth unemployment is 50% in some of these countries) - funny how selective the news is. eh?

    So the pound falling is no surprise, because uncertainty is reflected by market volatility. But anyone who thinks Brexit was "planned" is having a laugh - and who knows what might happen in the next 2 months (US President....something in Russia? China? Greece?)

    In short, volatile markets are not the story -the underlying uncertainty is...

    Let's all have a pint ;-)

    P.

  19. bombastic bob Silver badge
    Black Helicopters

    bot-based currency manipulation

    ya think MAYBE someone made money off of this?

    nobody comes to mind... not even George Soros. He'd never do THAT, right? No, wait...

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