Flash crash? I put it in a novel years ago, says Robert Harris
CHIEF REPORTER THEY were four minutes that shook the British economy. A “flash crash” just after midnight on Friday morning saw the value of the pound plummet by an astonishing 6 per cent in a mere 240 seconds.
Yesterday, Robert Harris, the bestselling author, said the cause of the crash was most likely a computer algorithm similar to one he wrote about in his novel five years ago.
In the novel, a super-computer causes a worldwide crash by betting against the markets and making its own out-ofcontrol financial decisions.
Experts now agree with Harris that a computer algorithm may well have been to blame for Friday’s shock events, which saw the pound plunge against the dollar to just $1.13 in trading in Hong Kong and Singapore.
Some computer algorithms – known as algos – can make trades based on news articles and even what’s trending on Twitter. In this case it is now thought a computer noticed a number of negative articles on Brexit, following Theresa May’s Conservative Party conference speech, and triggered a dramatic run on the pound.
A similar algorithm features at the heart of published in 2011, in which a super computer based in Switzerland causes a worldwide stock market crash. The computer, named VIXAL-4, measures fear levels in the financial markets, although, being a novel, it goes quite a bit further with murderous intent.
Harris, whose blockbuster also include books and
told “This flash crash is a bit like
When you get these huge unexplained movements you have to look at the computers. The whole thing is out of control.
“There was a flash crash in 2010 when I was writing the book and I actually put it into the novel. In my novel the machine engineers a panic sell-off that has an enormous impact.”
In the novel, set in Switzerland over the course of 24 hours, the computer can generate “successful hedges” on the financial markets much faster than humans.
Such algorithms, it now appears, may have been involved in Friday morning’s flash crash. Kathleen Brooks, research director at the financial broker City Index, said last week: “These days some algos trade on the back of news sites, and even what is trending on social media sites such as Twitter, so a deluge of negative Brexit headlines could have led to an algo taking that as a major sell signal for the pound. “Once the pound started moving lower then more technical algos could have followed suit, compounding the short, sharp, selling pressure.” Ms Brooks added: “Apparently it was a rogue algorithm that triggered [this] selloff after it picked up comments made by the French President François Hollande, who said if Theresa May and Co want hard Brexit, they will get hard Brexit.” At the time of the crash only the Asian, New Zealand and Australian markets were open, so the trades made in Hong Kong to sell the pound had an exaggerated effect. In the 2010 flash crash, the US stock market fell 1,000 points in minutes, much of it as a result of “software-driven” selling. The Bank of England and other regulators are currently investigating the cause of Friday’s crash. The experts are looking at whether crucial “sell” orders were placed by computers rather than humans.