Here come the RBA excuses

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Dr Quan Gan, a senior lecturer in finance at the University of Sydney via the AFR:

“The RBA protocols are based on the assumption that the rates decision is secret until everybody in the market gets the information at the same time. But time stamps are controlled by machines and as algorithmic trading bots become more powerful that technology is a gamechanger. The RBA and ASIC do need to investigate to ensure that certain machines are not receiving the information moments ahead of the rest of the market,” Dr Gan said.

“It can’t be ruled out without thorough investigation that some traders are getting a speed advantage due to an IT issue,” he said.

…One New York-based source who has been following the developments said: “RBA is pissed off that’s for sure. Algos [algorithmic traders] can’t be right three for three without the intel.”

Where’s the comprehensive and transparent investigation then? It didn’t look like a millisecond advantage to me.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.