It has been 25 years since Black Monday, when stock markets crashed around the globe and Wall Street woke up to the risks of computerised trading.
Since then, computing power has grown exponentially and so have the risks. It may not take a full trading day for the markets to lose 25 per cent today – it could happen in moments. And while traders knew trouble was brewing when they arrived for work on October 19 1987, today companies can lose hundreds of millions of dollars out of nowhere, the consequence of a badly written piece of code or the unpredictable interaction of thousands of algorithms, or “algos”, flickering across America’s fragmented markets.
This fragmentation in US markets is largely by design. Five years ago, the Securities and Exchange Commission introduced rules to encourage greater competition and break the grip of the traditional exchanges, making stock trading cheaper and more democratic. Mary Schapiro, the SEC chairman, says these goals have largely been met, to the benefit of retail investors.