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| Version 2 | Version 3 |
|---|---|
| Flash crash sees the pound gyrate in Asian trading | Flash crash sees the pound gyrate in Asian trading |
| (35 minutes later) | |
| The pound has dived on Asian markets with automated trading being blamed for the volatility. | The pound has dived on Asian markets with automated trading being blamed for the volatility. |
| At one stage it fell as much as 6% to $1.1841 - the biggest move since the Brexit vote - before recovering to $1.23, still down 1.5%. | At one stage it fell as much as 6% to $1.1841 - the biggest move since the Brexit vote - before recovering to $1.23, still down 1.5%. |
| It is not clear what triggered the sudden sell-off. Analysts say it could have been automated trading systems reacting to a news report. | It is not clear what triggered the sudden sell-off. Analysts say it could have been automated trading systems reacting to a news report. |
| The pound has been volatile since the UK voted to leave the European Union. | The pound has been volatile since the UK voted to leave the European Union. |
| The sharp drop came after the Financial Times newspaper published a story online about French President Francois Hollande demanding "tough Brexit negotiations". | The sharp drop came after the Financial Times newspaper published a story online about French President Francois Hollande demanding "tough Brexit negotiations". |
| "It's difficult to know exactly what triggered it," Angus Nicholson, market analyst with IG in Melbourne, told the BBC. | "It's difficult to know exactly what triggered it," Angus Nicholson, market analyst with IG in Melbourne, told the BBC. |
| Analysts speculate that a computer may have been set to scan the news for negative Brexit stories, with the order to sell if it found any. | |
| The trigger could have also been a simple mistake, or what's know as a fat finger trade, when a trader enters a wrong number. | |
| 'Feedback loop' | |
| The situation could have been exacerbated by trading algorithms - software which is designed to trade automatically and can react much faster than human traders. | |
| "Possibly a keyword or newsflow-focused algorithm started the selling in the pound based on that article, and other algorithms may have seen the volume and momentum coming into the pound at what is normally a relatively low volume time," Mr Nicholson said. | "Possibly a keyword or newsflow-focused algorithm started the selling in the pound based on that article, and other algorithms may have seen the volume and momentum coming into the pound at what is normally a relatively low volume time," Mr Nicholson said. |
| "That may have brought in other algorithms which compounded the selling creating a feedback loop that resulted in a flash crash," Mr Nicholson explained. | "That may have brought in other algorithms which compounded the selling creating a feedback loop that resulted in a flash crash," Mr Nicholson explained. |
| The incident happened at a time when there is very little pound trading going on - which means that any sell-off will have a bigger impact than during busy hours. | The incident happened at a time when there is very little pound trading going on - which means that any sell-off will have a bigger impact than during busy hours. |
| "It's a very volatile currency at the moment," Mr Nicholson said. | "It's a very volatile currency at the moment," Mr Nicholson said. |
| Traders remain nervous about the fallout from the UK's talks with the EU over leaving the bloc. | Traders remain nervous about the fallout from the UK's talks with the EU over leaving the bloc. |
| Last Sunday, the Prime Minister Theresa May said she would trigger Article 50, the clause needed to start the exit process, by the end of March 2017. | Last Sunday, the Prime Minister Theresa May said she would trigger Article 50, the clause needed to start the exit process, by the end of March 2017. |
| Sterling has been "on a precipice" since then, according to Sean Callow, senior currency strategist at Australian bank, Westpac. | Sterling has been "on a precipice" since then, according to Sean Callow, senior currency strategist at Australian bank, Westpac. |
| "I think we've underestimated how many people had money positions for a very wishy-washy Brexit, or even none," he said. | "I think we've underestimated how many people had money positions for a very wishy-washy Brexit, or even none," he said. |
| Interconnected world | Interconnected world |
| Even though the pound recovered ground immediately after the flash crash, Friday's tumble might still have a broader impact. | Even though the pound recovered ground immediately after the flash crash, Friday's tumble might still have a broader impact. |
| Mark Priest, a trader at ETX Capital said: "It becomes a confidence thing - is there something lurking out there we don't know about?" | |
| Nicholas Teo of KGI Securities in Singapore said: "In this deeply interconnected and highly automated world of trading, a move as sharp as what we saw this morning on a product as widely traded as sterling, will almost certainly lead to unintended consequences for many." | |