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Tweet From Hacked AP Account Causes High Freq. Traders To Drop DOW 150 Points

Posted by Soulskill on from the our-culture-will-eventually-collapse-due-to-an-errant-tweet dept.

New submitter Mike Lape writes "Stocks plunged and recovered within minutes after the hacked AP Twitter account sent out a tweet that indicated that the White House had been the victim of an explosion and that President Obama had been injured. '...the Dow Jones Industrial Average took a quick 143-point plunge, before recovering most of its losses within minutes. The three-minute plunge triggered by the tweet briefly wiped out $136.5 billion of the S&P 500 index's value, according to Reuters data. Interestingly, Tuesday has been the best day of the week for the blue-chip this year with an average return of 0.46 percent. If the index closes in the black today, it will have been up for the 15th consecutive Tuesday. The last time the Dow rose for 15 straight Tuesdays was in 1927.' An analyst said, 'That goes to show you how algorithms read headlines and create these automatic orders – you don't even have time to react as a human being.'"

13 of 314 comments (clear)

  1. First for banning HFT by Anonymous Coward · · Score: 5, Insightful

    It serves no purpose.

    1. Re:First for banning HFT by interkin3tic · · Score: 5, Insightful

      How about we emphasize that it hurts productive industries and threatens the stability of the economy, rather than just say it serves no purpose. We don't want to discourage it simply because it doesn't help anyone but a few people, we want to discourage it because it HARMS the rest of us.

    2. Re:First for banning HFT by tnk1 · · Score: 5, Insightful

      And it probably does do that... but the stabilization is probably offset entirely by the strategies that the HFT algorithms use. In short, many of them are playing a meta-game of "this line will do that because lines usually do these things", as opposed to: "this looks like a good investment because it has good revenue and solid assets".

    3. Re:First for banning HFT by AuMatar · · Score: 5, Funny

      Also, they aren't pissing on your leg- they're adding to your leg's liquidity.

      --
      I still have more fans than freaks. WTF is wrong with you people?
    4. Re:First for banning HFT by Anonymous Coward · · Score: 5, Insightful

      But in this case, the HFT lost money while everyone else made money (those who bought at the cheaper prices). This may be a reason not to use HFT, but it's no reason to ban it.

    5. Re:First for banning HFT by Anonymous Coward · · Score: 5, Insightful

      That goes to show you how algorithms read headlines and create these automatic orders

      No they don't. That would be the most stupid trading strategy ever imagined, you would loose your shirt in less time than you can say "Goolge translate".

      What happened is that actual people reacted to the news and the trading algorithms (not necessarily HFT, but trading bots) thought they hit a pattern and amplified the movement. Nobody lost anything except the bot herders that sold at -150 because they trusted their bots. I really can't see how that "hurts productive industries and threatens the stability of the economy" as you say.

    6. Re:First for banning HFT by llZENll · · Score: 5, Interesting

      We need a new exchange that only executes trades once per month. If a company is on this exchange it is not allowed to be on any other exchanges. Problem solved. If you need your money out early there is a small fee. No more flash crashes, much less speculation, invest in a company due to dividends and growth and not emotionally fabricated stock appreciation.

    7. Re:First for banning HFT by TsuruchiBrian · · Score: 5, Interesting

      The problem isn't more regulations vs. less regulations. The problem is coherent system vs. incoherent system. You can have less regulation, but then you can't have bailouts. You can have bailouts but then you need more regulation. The problem of the recent financial collapse was that the system wasn't coherent. There was less regulation and bailouts, That's a recipe for disaster. The authoritarians blame the lack of regulations and the libertarians blame the bailouts. Neither is right or wrong. They just prefer moving to different coherent systems.

  2. Get rich quick scheme? by almitydave · · Score: 5, Interesting

    I almost wonder if it was deliberately done to make a quick buck off a short sell. Sell high, make everyone panic, buy low.

    --
    my, your, his/her/its, our, your, their
    I'm, you're, he's/she's/it's, we're, you're, they're
  3. Gosh! by fuzzyfuzzyfungus · · Score: 5, Funny

    I sure am glad that, unlike crazy neckbeard stuff like bitcoins, Serious Professional economic instruments don't suffer hilariously baseless volatility because some goofy website got hacked...

    That would, like, reduce my confidence in the rationality of the market.

  4. Thanks. by Fuzzums · · Score: 5, Insightful

    I want to thank the stock market, once again, for fucking, I mean speculating with my, no, our economy.
    Traders don't give a shit. The man in the street gets fired because stock prices need to go up and up and up and then - oh surprise - they crash.
    My world can do without stock market.

    --
    Privacy is terrorism.
  5. Re:Wow! by alexander_686 · · Score: 5, Informative

    I will point out something to buy and hold investors

    The Bid / Ask spread has dropped by 90% in the past 30 years. You used to pay .5% to 2% for each trade – not it basically nothing. Moving to decimalization helped, but it is the HFT that really collapsed the spread. This is even truer for ETFs then for normal stock.

    The fees that mutual funds and ETFs (which a lot of buy and hold investors hold) have also collapsed the past 30 years. Specifically for index funds, they have fallen by 90%. There are a lot of reasons for this, but about a quarter to a third is lower trading costs, which can be traced backed to HFT.

    So, you save about 1% to get into a investment, and about .25% each year if that investment is a mutual fund.

  6. Easy come easy go... by WaffleMonster · · Score: 5, Funny

    sell sell sell

    NASA reports asteroid on collision course for earth expected to "obliterate" housing market.

    sell sell sell

    Gold prices expected to reach a 20 year low as Lord Ganesh spotted on Indian TV favoring peanuts over gold.

    sell sell sell

    Acme Toothpick Company announces it will be laying off 1 million workers as the last tree in the amazon rain forest is cut down.

    sell sell sell

    North Korea launches devastating nuclear attack against giant sea turtles invading its territorial waters. Fears of radioactive fish expected to have catastrophic effects on east Asian seafood markets.

    sell sell sell