“The Mother of All Flash Crashes”- Doug Kass Sees Cyber Surprises in 2016
- If you don't like doom and gloom, these financial industry predictions for 2016 aren't for you, as terrorism looks to disrupt the markets.
Among the interesting reads regarding predictions for investments in 2016 is Doug Kass’s two part '15 Surprises for 2016’. President of hedge fund Seabreeze Partners Management, Doug Kass is well known as a longtime contributor to TheStreet.com and its Real Money Pro site.
Taking a gloomy stance, Kass didn’t hold back as he expects terror acts, both in the physical and cyber world, to wreak havoc on the global financial markets during 2016.
Among the predictions is that “Terrorism Goes Cyber”. Kass expects a large cyber terrorism event to be triggered by Middle Eastern, Russian and Chinese hackers who invade computers of the US financial industry. The results would lead to a series of trading outages affecting trading markets and overnight settlement systems.
For stock prices, Kass expects these disruptions to trigger the ‘The Mother of All Flash Crashes’ and lead to the largest single day point drop in the Dow Jones 30 as it falls 1,100 points. Among the effects, Kass stated that the flash crash would lead to renewed anti-HFT sentiment from the US government. This would cause legislation being written up to curb the “unfair trading field” of HFT traders and the outlawing of co-location servers and spoofing of trades and Market Depth Market Depth Market Depth is a characteristic of a given market and its ability to handle large order sizes without materially affecting the price of the underlying asset or currency pair. Broad-based definitions of market depth characterize it as a function of liquidity and trading volume.In its most simplistic sense, market depth reflects a real-time list displaying the quantity to be sold versus unit price. This in turn is organized by price level and is reflective of real-time market activity. In theory, market depth is the size of an order needed to move the market price by a given amount. In practice market depth depends on the amount of open orders in a given market, which provide liquidity for order execution. What Determines Market Depth?While some brokers may be quoting better prices at first glance, the depth of book metric determines how frequently clients can hit the levels that are quoted. As a result, the real execution price may differ, provided that the clips traded are in significant size.Several factors influence market depth. This includes variables such as tick size, or the minimum price at which trades made be executed. In addition, trading restrictions or active limits, permissible leverage constraints, and price movement barriers are also determining factors of market depth.One of the most important elements of market depth is the level of transparency associated with a given market. For example, the latest bid and asking prices are typically public knowledge and made available to most participants.However, additional information regarding the size of these offers and pending bids or offers that are not the best can be hidden for a number of reasons. Any absence of available information can also affect the overall willingness of participants to add market depth as well. Market Depth is a characteristic of a given market and its ability to handle large order sizes without materially affecting the price of the underlying asset or currency pair. Broad-based definitions of market depth characterize it as a function of liquidity and trading volume.In its most simplistic sense, market depth reflects a real-time list displaying the quantity to be sold versus unit price. This in turn is organized by price level and is reflective of real-time market activity. In theory, market depth is the size of an order needed to move the market price by a given amount. In practice market depth depends on the amount of open orders in a given market, which provide liquidity for order execution. What Determines Market Depth?While some brokers may be quoting better prices at first glance, the depth of book metric determines how frequently clients can hit the levels that are quoted. As a result, the real execution price may differ, provided that the clips traded are in significant size.Several factors influence market depth. This includes variables such as tick size, or the minimum price at which trades made be executed. In addition, trading restrictions or active limits, permissible leverage constraints, and price movement barriers are also determining factors of market depth.One of the most important elements of market depth is the level of transparency associated with a given market. For example, the latest bid and asking prices are typically public knowledge and made available to most participants.However, additional information regarding the size of these offers and pending bids or offers that are not the best can be hidden for a number of reasons. Any absence of available information can also affect the overall willingness of participants to add market depth as well. Read this Term.
Cyber fraud in 2015
While Kass’s cyber predictions for 2016 are extreme, they do follow unfortunate trends from 2015. In addition, many of his other scary forecasts are based on problems faced last year. For example, Kass’s top surprise of 2016 is "Terrorism Dismantles an Already Fragile Global Recovery". The gist is that Kass believes that shares in airlines, hotels and entertainment companies will underperform. While surprising for some, elements of this problem were seen in 2015 as the alleged ISIS downing of a Russian commercial jet decimated Egypt’s tourism to the Sinai region.
In terms of cyber related problems, 2015 turned out to be a tough year for many financial firms. Topping the list was the use of cyber theft of broker databases. Stealing customer information from brokers and banks such as JPMorgan Chase, ETrade, FXCM and Scottrade, hackers pumped penny stocks to these clients as well as posed as them to issue bank transfers to external accounts.
Another problem was a bout of DDoS attacks affecting many Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value. Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value. Read this Term related brokers and service providers. With their servers inundated with attacks, traders were not able to access their accounts and the dissemination of real time prices was halted.
On the bright side, with cyber hacking moving to the top of the headlines in 2015, awareness has increased in the financial industry of vulnerabilities and potential solutions. As such, financial firms are now more likely to be using technology for DDoS prevention, database protection and payment transfer tokenization.
Among the interesting reads regarding predictions for investments in 2016 is Doug Kass’s two part '15 Surprises for 2016’. President of hedge fund Seabreeze Partners Management, Doug Kass is well known as a longtime contributor to TheStreet.com and its Real Money Pro site.
Taking a gloomy stance, Kass didn’t hold back as he expects terror acts, both in the physical and cyber world, to wreak havoc on the global financial markets during 2016.
Among the predictions is that “Terrorism Goes Cyber”. Kass expects a large cyber terrorism event to be triggered by Middle Eastern, Russian and Chinese hackers who invade computers of the US financial industry. The results would lead to a series of trading outages affecting trading markets and overnight settlement systems.
For stock prices, Kass expects these disruptions to trigger the ‘The Mother of All Flash Crashes’ and lead to the largest single day point drop in the Dow Jones 30 as it falls 1,100 points. Among the effects, Kass stated that the flash crash would lead to renewed anti-HFT sentiment from the US government. This would cause legislation being written up to curb the “unfair trading field” of HFT traders and the outlawing of co-location servers and spoofing of trades and Market Depth Market Depth Market Depth is a characteristic of a given market and its ability to handle large order sizes without materially affecting the price of the underlying asset or currency pair. Broad-based definitions of market depth characterize it as a function of liquidity and trading volume.In its most simplistic sense, market depth reflects a real-time list displaying the quantity to be sold versus unit price. This in turn is organized by price level and is reflective of real-time market activity. In theory, market depth is the size of an order needed to move the market price by a given amount. In practice market depth depends on the amount of open orders in a given market, which provide liquidity for order execution. What Determines Market Depth?While some brokers may be quoting better prices at first glance, the depth of book metric determines how frequently clients can hit the levels that are quoted. As a result, the real execution price may differ, provided that the clips traded are in significant size.Several factors influence market depth. This includes variables such as tick size, or the minimum price at which trades made be executed. In addition, trading restrictions or active limits, permissible leverage constraints, and price movement barriers are also determining factors of market depth.One of the most important elements of market depth is the level of transparency associated with a given market. For example, the latest bid and asking prices are typically public knowledge and made available to most participants.However, additional information regarding the size of these offers and pending bids or offers that are not the best can be hidden for a number of reasons. Any absence of available information can also affect the overall willingness of participants to add market depth as well. Market Depth is a characteristic of a given market and its ability to handle large order sizes without materially affecting the price of the underlying asset or currency pair. Broad-based definitions of market depth characterize it as a function of liquidity and trading volume.In its most simplistic sense, market depth reflects a real-time list displaying the quantity to be sold versus unit price. This in turn is organized by price level and is reflective of real-time market activity. In theory, market depth is the size of an order needed to move the market price by a given amount. In practice market depth depends on the amount of open orders in a given market, which provide liquidity for order execution. What Determines Market Depth?While some brokers may be quoting better prices at first glance, the depth of book metric determines how frequently clients can hit the levels that are quoted. As a result, the real execution price may differ, provided that the clips traded are in significant size.Several factors influence market depth. This includes variables such as tick size, or the minimum price at which trades made be executed. In addition, trading restrictions or active limits, permissible leverage constraints, and price movement barriers are also determining factors of market depth.One of the most important elements of market depth is the level of transparency associated with a given market. For example, the latest bid and asking prices are typically public knowledge and made available to most participants.However, additional information regarding the size of these offers and pending bids or offers that are not the best can be hidden for a number of reasons. Any absence of available information can also affect the overall willingness of participants to add market depth as well. Read this Term.
Cyber fraud in 2015
While Kass’s cyber predictions for 2016 are extreme, they do follow unfortunate trends from 2015. In addition, many of his other scary forecasts are based on problems faced last year. For example, Kass’s top surprise of 2016 is "Terrorism Dismantles an Already Fragile Global Recovery". The gist is that Kass believes that shares in airlines, hotels and entertainment companies will underperform. While surprising for some, elements of this problem were seen in 2015 as the alleged ISIS downing of a Russian commercial jet decimated Egypt’s tourism to the Sinai region.
In terms of cyber related problems, 2015 turned out to be a tough year for many financial firms. Topping the list was the use of cyber theft of broker databases. Stealing customer information from brokers and banks such as JPMorgan Chase, ETrade, FXCM and Scottrade, hackers pumped penny stocks to these clients as well as posed as them to issue bank transfers to external accounts.
Another problem was a bout of DDoS attacks affecting many Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value. Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value. Read this Term related brokers and service providers. With their servers inundated with attacks, traders were not able to access their accounts and the dissemination of real time prices was halted.
On the bright side, with cyber hacking moving to the top of the headlines in 2015, awareness has increased in the financial industry of vulnerabilities and potential solutions. As such, financial firms are now more likely to be using technology for DDoS prevention, database protection and payment transfer tokenization.