Traders were baffled by the overnight “flash crash” in the pound, with theories emerging about what happened to send the currency over the edge. Analysts pointed to possible causes including rogue computer trades, an accidental “fat finger” transaction and tough comments from the French president, François Hollande, on Brexit negotiations. The most popular theories revolve around algorithmic trading, also known as black box trading. Thus, algorithmic trading could have set off a vicious circle in which the pound’s slump became a self-fulfilling prophecy. Some market watchers have also speculated that a fat finger trade, where someone accidentally omits a decimal point or types the wrong number, could have been a factor.

Source: The Guardian October 07, 2016 08:14 UTC