Danny Riley has spent his life on trading floors. He’s seen people make millions and lose millions. In seconds and in minutes. He’s seen every major market crash since the 1980s and watched political turmoil unfold through the lens of the world’s largest trading floor. Riley has dedicated his life to connecting buyers and sellers. His story is remarkable and the insights he brings to the table about trading are invaluable.
“When you’ve been in the business as long as I have and you’ve been through so many ups and downs — Whether it be the ‘87 Crash, Asian Currency Crisis, Russian Ruble Crisis, Gulf War 1, Gulf War 2, watching scud missiles land in Israel — I’ve been there and I’ve seen it.”— Danny Riley on the things he’s witnessed from the Chicago Mercantile Exchange
6 years ago stock exchanges everywhere woke up to a new reality. Financial panics could now occur in minutes. They no longer were drawn out by days or weeks. This moment was the Flash Crash. On this day the S&P 500 and Dow Jones Industrial Average suffered some of their biggest intraday losses in history. The chart below shows what happened.
What caused the Flash Crash? That’s still a mystery. The U.S. Government thinks they found the guy. But you have to hear what Riley says about this. He’s not sure if that makes sense — there are just too many traders and firms in the market. How can one guy trading from his parents’ house cause such a market catastrophe?
Perhaps there’s an alternative explanation. One that is simply related to the advancement of electronic trading and just pure randomness. We’ve all heard about the rise of high frequency trading. Or about rogue algorithms programmed to act on certain market inputs.
“There are too many players out there to pin this on one guy. What it came down to was — they needed somebody. We’re coming up on the five year anniversary and there were a lot of losses incurred that day. And there’s still be no real explanation of what happened.” — Danny Riley
In our latest episode of The Must Follow Podcast, we sat down with Riley. The man also known as @MrTopStep. Our conversation dives deep into the life of a floor trader and some of the unique experiences that come with this profession. We discuss the Flash Crash and what it means for markets today:
“Things have gotten out of control. And you see it everyday. I think the most loaded up markets where you find it are the S&P 500 and Crude Oil — our two main markets. This stuff isn’t going away.” — Danny Riley