Quant God Jim Simons: The Flash Crash Was Beautiful

Jim Simons, founder of the mega quant hedge fund, Renaissance Tech, spoke about high frequency trading and the causes of the flash crash yesterday on CNBC.

He thinks the “disastrous flash crash” everyone’s still freaking out about is totally misconstrued.

“After seven minutes, enough action came back that the whole thing was reversed. In my opinion, the system worked beautifully.”

Simons goes on to say that he was out of the office, but on the phone with one of his men a few minutes after the flash crash started and the conversation went something like this –

Other guy: The market is crashing!!!! It’s insane!!!!! It’s down 900 points!

Simons: It is?

Other guy: Well, now it’s only down 800.

Simons: It is?

Other guy: Well now it’s only down 700.

So you can see why Simons thinks it was no big deal – he wasn’t shell-shocked by the first few minutes before the recovery kicked in.

But still, he has a point. He says:

“It seems to be caused by the absolute normal thing – that some people just didn’t want to trade, and especially buy when things were dropping like a shot. Some orders got cancelled and that was exacerbated by one of the exchanges stopping and another not so that the folks that would normally step in to buy something couldn’t.”


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