Robin Hood campaigners demand end to ‘flash crashes’

AN UPSURGE in high‑speed, high‑frequency share and commodities trading is undermining stock markets and another reason why a financial transaction tax should be imposed, a leading campaign group says.

The Robin Hood Tax campaign claims in a report out today that an “explosion” of such automatic computer‑generated trades is triggering an increasing number of “flash crashes”.

Financial Crisis 2: The Rise of the Machines, says the rise in such trading “has left regulators floundering, unable to step in to prevent problems because of the speed at which transactions are occurring”.

The report says: “Unheard of six years ago, experts estimate that high‑frequency trading conducted by computers according to complex algorithms may account for more than three‑quarters of all equity deals in the UK.”

It calls for western governments to follow the lead of Hong Kong and impose a financial transaction tax to limit high‑frequency trading.

“In pursuit of a quick buck, humans are ceding control of financial markets to machines and are unable to intervene fast enough if things go wrong,” Richard Gower, a spokesman for the Robin Hood Tax campaign, says.

“A financial transaction tax would throw sand in the wheels of markets and could raise billions to tackle poverty in the UK and in poor countries which were hit hard by the financial crisis.”

Today’s report cites the “most dramatic flash crash” as the plunge in Wall Street last spring. On 6 May the Dow Jones index plunged 9 per cent, with more than half the fall occurring in just seven minutes.

High‑speed, high‑frequency trades had also spread from shares to bonds and commodities, it says, with “the potential to cause havoc in markets for commodities which are central to our economies”.