Paul Tudor Jones Explains How He Would Prevent Another Flash Crash

Jones circa ’89

Paul Tudor Jones, the hedge fund manager of the Tudor Fund, spoke about how he’d prevent another Flash Crash yesterday at the Global Financial Leadership Conference in Naples, Florida.In two words, price limits.

From Bloomberg:

“What more pertinent example that underscores the importance and need of price limits than the flash crash of May 6th of this year,” Jones said.

“Anything greater than an 8 per cent move in stocks in one day is probably because of something either so fantastic or so bad that taking more than another day to think about it is a good thing.”

The price limits Jones suggests would prevent individual stocks, like Accenture, for example, for which there was a bid at a ridiculous $.01 on May 6, the day of the Flash Crash, from experiencing price fluctuations above or below 8% of their price at opening bell.

And here’s another thing that Jones thinks would help.

“Cash, futures and options markets should be harmonized so that closing one market doesn’t force liquidity into another market.”

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