OTC flash crash: Dealers consider risks of HFT invasion

The fixed-income flash crash

Riccardo Rebonato

A famous, though possibly apocryphal, story has nineteenth century bond traders in London barracking Nathan Rothschild for using carrier pigeons to get word of Admiral Nelson’s victory in the battle of Trafalgar ahead of the rest of the market – an information advantage that allowed him to make a killing. In the 1920s, it wasn’t pigeons, but telephones – some of the Wall Street old school complained these gadgets made trading an impersonal, ungentlemanly business.

Today, the technological

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