The Flash Crash of May 6th, 2010: WTF? – Københavns Universitet

The Flash Crash of May 6th, 2010: WTF?

HIPERFIT TALK by Dave Cliff, University of Bristol


In most advanced economies, large-scale socio-technical systems are increasing in complexity, and in socio-economic criticality, while our ability to engineer and manage such systems is probably not increasing at the same pace. The "Flash Crash" of May 6th 2010 is evidence of what may become more commonplace in future, and is evidence to support the concern that in advanced economies we may already be reliant on large-scale complex IT systems that support critical social and economic functions, and yet for which we cannot predict their failures until it is too late. Nevertheless, there is an established literature devoted to the study of technology failures, and that literature may be of some help: in the financial markets, practitioners and regulators should now be asking the question "Why Technology Failures?" (WTF?). I also argue here that, in the specific case of the global financial markets, there is an urgent need to develop major national strategic modeling and predictive simulation capabilities, comparable to national-scale meteorological monitoring and modeling capabilities. The intent here is not to predict the price-movements of particular financial instruments or asset classes, but rather to provide test-rigs for principled evaluation of systemic risk, estimating probability density functions over spaces of possible outcomes, and thereby potentially identifying "black swan" failure modes in the simulations, before they occur in real life, by which time it is typically too late.


Dave Cliff is a Professor of Computer Science at the University of Bristol. He has more than 20 years of experience as a researcher in computer science and complex adaptive systems. He has previously worked in academic faculty posts at the University of Sussex, at the MIT Artificial Intelligence Lab, and at the University of Southampton.

He also spent seven years working in industry: initially as a senior research scientist at Hewlett-Packard Research Labs where he founded and led HP's Complex Adaptive Systems Research Group; then as a Director in Deutsche Bank's London Foreign-Exchange Complex Risk Group. His research for HP included early work, in the mid-to-late 1990s, on novel decentralized management systems for utility-scale

("cloud") computing systems; as part of that work he invented the Zero-Intelligence Plus (ZIP) adaptive automated trading strategy. In

2001 a team of researchers at IBM showed that ZIP algorithmic traders consistently outperform human traders. In October 2005, Cliff was appointed Director of the £10m EPSRC-funded five-year UK national research and training initiative in the science and engineering of Large-Scale Complex IT Systems (the LSCITS Initiative). He is author or co-author on over 70 academic publications, and inventor or co-inventor on 15 patents; he has undertaken advisory and consultancy work for a number of major companies and for various departments of the UK Government; and he has given around 200 keynote lectures and invited seminars.

All are welcome.

Attendance is free.

No registration necessary.

Host: Fritz Henglein

HIPERFIT is the Research Center for Functional High-Performance Computing for Financial Information Technology, a collaboration of the departments of computer science (DIKU), mathematics (IMF) and physics (NBI) at U. Copenhagen with the Danisch finance IT sector organised under CFIR,

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