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Stock Market Sell-Off Might Stem From Trader's Fat Finger
s122604 points out a CNBC story according to which "the catalyst for today's extraordinary price swing (at one point the Dow lost almost 9 percent in less than an hour) may have been because a trader entered a 'B' for billions instead of an 'M' for millions on a trade of Procter and Gamble: 'According to multiple sources, a trader entered a "b" for billion instead of an "m" for million in a trade possibly involving Procter & Gamble, a component in the Dow. (CNBC's Jim Cramer noted suspicious price movement in P&G stock on air during the height of the market selloff).' Unbelievable there are no safeguards to protect against this."
I suspect that I speak for everyone with their retirement money and/or savings invested in the markets when I say: HO-LY SHIT.
Frankly, I was more comfortable with the concept that the DOW could drop 1000 points in one afternoon due to some obscure overseas debt concerns than I am the idea that the DOW can drop 1000 points in one afternoon because of a fucking typo. I realize that markets and the economy in general are collective illusions to begin with and all that, but do we really need to be reminded quite so forcefully?
Might be time to invest my money in something a little more solid, like canned food and ammunition.
Every year during my review, I just pray the words "slashdot.org" aren't mentioned.
Thats a f*ing fat finger if it hit b instead of m! or maybe its not a qwerty
www.RacquetUp.org - Helping Detroit Youth
I'm not sure exactly how you protect against that. The software is meant to detect a certain trigger and complete certain actions based on that trigger. It seems in principle impossible for the software to figure out the reasons behind the trigger occurring (how do you tell the difference between an aggressive speculative trade and a typo when they both result in the same thing? Namely, selling off $X amount of shares.). This is not just a problem with software, but you can imagine humans doing the same thing. They see a huge sell off of a certain stock and need to make a quick on-the-spot decision on whether to hold or sell. Maybe the seller figured out something was going on in the company. Maybe it was a typo. You can't know for sure.
So it seems less like a problem with the software, and more like just a side effect of a speculative trading model.
When you can make money hand over fist doing nothing, a very bad thing has happened: work has ceased to become a rewarded function. Instead, it's who you can screw over with dodgy investment strategies and exotic financial instruments that are not only worthless, but a liability. It's time that we end the casino markets and return to investing in things that are actually part of the economy that creates jobs - manufacturing, infrastructure, and technology.
Fund managers who literally do nothing but piss away money are making $1,000 an hour, and the people who educate our children are making less than $20 an hour. Something is seriously wrong with this picture.
I'd love to have had my eye on the boards at that time, there was major money to be made in those brief minutes between when the B was bought and when it was immediately resold. This is not so much a problem of insanity on the stock exchange floor, as it is the automated stock trading programs running continually looking to take small advantages on micro market fluctuations. This one just tripped a few too many of them all at once, causing something of a domino effect. I'd expect 80%+ of the "very high volume" of that time period was done entirely by automated trade programs.
Then one has to ask, was the mistake in the fat finger that hit "B" instead of "M", the (popular option) "are you sure you want to do that?", OR can we look at the trading apps that haven't been told to do a sanity check when they see a very unusual trade occur. IMHO this entire fiasco is a collection of bugs (ok we'll call them "oversights") in the auto trade programs on wallstreet. The people on the floor were just looking at the board with their jaws dropped open trying to figure out what was going on -- what the programs SHOULD have been doing. Should have been throwing up a flashy window on someone's screen saying HEY COME TAKE A LOOK AT THIS! Instead they just went wild selling and buying, thinking they were reacting to market conditions, not able to consider fat fingers.
I work for the Department of Redundancy Department.
It amazes me that the financial industry continually gets a free pass on matters that would result in public outrage towards any other industry that deals with people's livelihoods.
This explanation, whether true or not, is equivalent to saying that an airplane crashed because of a single faulty sensor.
Or a bridge fell due to one rusted bolt.
But, here, one fat finger led to the temporary destruction of nearly 1 trillion dollars of value! Would we tolerate such bogus explanations from aerospace engineers or architects? Why can we not demand the same from our financial "engineers"?
When I used to write my own automated trading system software, I wrote some code that ignored bad events until they had persisted for a small period of time. That was motivated by a stop loss order I had in place automatically taking me out of a position at a severe loss when a bad tick (one second) of data from a mistaken trade showed up, the chart was quite similar to today's mess. So it's easy to write something that rejects bad market data for a little bit, waiting for some confirmation before doing something rash. For what I traded, if I saw the same condition for five seconds straight, it was probably real and then I'd have the program act.
Unfortunately, the current situation market includes so many automated systems that try to make money based on high frequency trading that the normal safeguards here are rejected as "adds too much latency". It's yet another one of those situation where optimizing for the normal case, where fast trades are better, causes instability during unexpected situations.
Fund managers who literally do nothing but piss away money are making $1,000 an hour, and the people who educate our children are making less than $20 an hour. Something is seriously wrong with this picture.
Yes. And further, consider how Wall Street has attracted the best and the brightest of all of our people, math PhD's, engineers, those with an excellent ability to see the broad patterns in society. Our most brilliant citizens are pulled into Wall Street as "quants" or traders or corporate lawyers, and are often paid six and seven figure remuneration per year. And to do what? To game the system in favor of their wealthy masters at the expense of the middle classes. Do they create wealth, or are they merely helping to transfer it from the hands of the many to the hands of the few who can afford their services. Wall Street quants were supposed to make recessions a thing of the past. We all know how that turned out.
Meanwhile fields like science, engineering and medicine lose the most brilliant individuals. Citizens who would formerly have become professors, providing independent analysis of society's problems instead become selfish multimillionaires, who then retire at 40 to a life unproductive leisure. Think of what these brilliant people could have done if their abilities were harnessed in the right fields and with the right motivation. Think of the problems that could have been solved. Think of the knowledge that could have been gained. Think of the lives that could be saved by new medical discoveries. Think of the new technologies that could have been developed for the common good. Wall Street's co-opting of so many of the geniuses in our society will have profound consequences for our civilization. I can only hope that we can undo much of the damage been done by this corruption.
This and no other is the root from which a tyrant springs; when first he appears as a protector - Plato (423 to 327 BC)
I mean really? What do these traders produce? Nothing. But they earn money, quite big money solely on speculation. What is the purpose of this at all?
the Big Problem the audit would "uncover" has nothing to do with the dollar's worthlessness, but in majority of people finding out our Federal Reserve is just local branch of international banking cartel, manipulating th economy of and draining jobs and wealth from the U.S. for those in a position to take advantage of economic cycles.
What do you think "auditing the Fed" really means? The Fed's books are already open and reviewed by accountants regularly. In this context, "auditing the Fed" means putting the Fed under more control of politicians, which does NOT WORK... just ask Japan. Yes, the politicians would LOVE to get their hands on the money spouts.
I find that when people go off about the Fed, monetazation, etc they generally don't know jack about economics and ultimately start babbling about end of world scenarios, the government, blah, blah blah rather than economic facts.
If you can read this... 01110101 01110010 00100000 01100001 00100000 01100111 01100101 01100101 01101011
? The Fed's books are already open and reviewed by accountants regularly.
Where are the m3 numbers?
The fed has been actively inflating America's way out of debt for years. It just hasn't told anyone yet - gotta wait until it'll do more good than harm.
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US will NEVER do this, it's impossible. It will print and print USD into hyper-inflation.
That's a nice theory. Complete nonsense of course. The US has been in this situation before multiple times.
The US has never defaulted. Not once - even when the national debt was a much higher percent of GDP than it is now, which happened after WWII. It also was approximately as high as it is now around 1880 as well as throughout the 1930s and in the 1950s and 1960s. Sure the numbers are bigger (inflation does that) but our GDP is bigger too. The solution to the deficit is fairly simple - cut spending on some combination of the military, social security and/or medicare. Not politically easy of course but certainly possible.
The reason your argument is nonsense is that if the US were to continue to just print money without regard to the consequences, the economy would crater since no one would trade with the US, and the government would be cast out of office. Your assumption that people can never accept any legislation that is good for the country but not them personally is demonstrably wrong and pathetically cynical. It also assumes that the people in charge have no clue or sense of responsibility or fear of losing power. As much as we criticize our government, they aren't complete fools - at least not all the time.
If you think that the markets reward long term investments that don't turn up in quarterly reports, you're not paying attention.
I'll take Warren Buffet's opinion on that over yours. Here's a hint: he disagrees with you. Yes the markets can be myopic but long term success gets rewarded handsomely. Companies of all sizes make investments with time horizons measured in decades on a daily basis. If few thought long term, the companies that did would have a heck of an advantage.
Moving jobs to third world countries is rewarded in the stock market, not building American factories to employ American workers.
Actually neither of those things is rewarded in the stock market. Profits and growth of profits are rewarded. Nothing else. If you can grow profits with American workers, the stock market is fine with that.
Suppose that the article is correct and some high-power trader accidentally placed an order 1000X the size of the intended order.
The mere fact that there is ANYONE in this market with this sort of power is all the evidence I need to convince me that the stock market is a rigged game and the big financial firms have the deck stacked in their favor. If their advantage was merely a result of sophisticated research and analysis and they played the game according to the same rules as everyone else, more power to them. When they can game the market with high frequency trades and cause wild price swings with a single keystroke however, they're just preying on the small investors who can't pull the same stunts.
If someone can do this "accidentally", then they could also "deliberately" skim off profits from anyone with stop-losses in place. I cringe to think of what happened to some small traders who might have had margin purchases in their E-Trade accounts and were auto-liquidated to meet margin requirements. Seems like the big fish could also game the options market.
By America, you mean Canada right.
Canada and Australia are in far stronger economic positions, especially per capita. It is our relatively small sizes that prevent us from expanding this further.
Investors are nervous about America due to your growing debt, Greece crashed when it's debt reached 110% of it's GDP and Greece counts on the rest of Europe to save it. The US debt is 10+ Trillion whilst your GDP is 14.6 Trillion. That's more then 2/3 of your GDP. Compared to Australia where our national debt is under 80 billion and our GDP is slightly over 1 Trillion (about 1.05), less then 10% is quite healthy for a nation in good times, very healthy for a nation in bad times. Then again Australia didn't really go into the GFC with a lot of debt to begin with.
Debt is only one of the factors, economic growth is also where Australia is beating almost all other first world nations.
My point is that the US needs to fix it's economy before it will entice investors back. The first step is to eliminate that money sink called the Iraqi war. Secondly would be to cut back on the thing that takes up over 50% of your budget, the military and then to ensure that the income is equal to or slightly greater then the expenditures including the scheduled payback of your loans (this will probably mean raising taxes) but American citizens wont permit this.
Calling someone a "hater" only means you can not rationally rebut their argument.
m3 is too expensive to track and a wild guess at best anyway... that's where m3 went...
If you can read this... 01110101 01110010 00100000 01100001 00100000 01100111 01100101 01100101 01101011