Sell-offs could be down to machines that control 80% of the US stock market, fund manager says

  • Many believe that the different sell-off episodes seen throughout 2018 were caused by these machines, as they act on immediate data releases, without taking the time to digest them as humans would.
  • The daily volume of algo trading can change according to volatility. But over the last few years its impact has become more visible.

Eighty percent of the daily moves in U.S. stocks are machine-led, a fund manager told CNBC on Wednesday.

The phenomenon, also called algorithm or algo trading, refers to market transactions that use advanced mathematical models to make high-speed trading decisions.

Many believe that the different sell-off episodes seen throughout 2018 were caused by these machines, as they act on immediate data releases, without taking the time to digest them as humans would.

“Eighty percent of daily volume in the U.S. is done by machines, so what you get is a lack of focus on earnings, a lack of focus on outlooks and you just get short-term movements based on very specific data that is released every day and that creates noise,” Guy De Blonay, fund manager at Jupiter Asset Management, told CNBC’s “Squawk Box Europe.”

The daily volume of algo trading can change according to volatility. But over the last few years its impact has become more visible. In 2017, J.P. Morgan said that “fundamental discretionary traders” accounted for only 10 percent of trading volume in stocks. This is when traders look at companies’ performance and outlook before deciding whether to buy or sell the shares.

De Blonay’s comments come after U.S. stocks fell sharply on Tuesday, on the back of concerns regarding the bond market.

Source: CNBC

 

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