The Herald Bulletin

Morning Update

Breaking News

April 24, 2013

How a phony tweet and computer trades sank stocks

NEW YORK — For a few surreal minutes, a mere 12 words on Twitter caused the world's mightiest stock market to tremble.

No sooner did hackers send a false Associated Press tweet reporting explosions at the White House on Tuesday than investors started dumping stocks — eventually unloading $134 billion worth.

Except most of the investors weren't human. They were computers, selling on autopilot beyond the control of humans, like a scene from a sci-fi horror film.

"Before you could blink, it was over," said Joe Saluzzi, co-founder of Themis Trading and an outspoken critic of high-speed computerized trading. "With people, you wouldn't have this type of reaction."

For decades, computers have been sorting through data and news to help investment funds decide whether to buy or sell. But that's old school. Now "algorithmic" trading programs sift through data, news, even tweets, and execute trades by themselves in fractions of a second, without slowpoke humans getting in the way. More than half of stock trading every day is done this way.

Markets quickly recovered after Tuesday's plunge. But the incident rattled traders and highlighted the danger of handing control to the machines. It also raised questions about whether regulators should be doing more to monitor the relationship between social media and the markets.

Irene Aldridge, a consultant to hedge funds on algorithmic programs, said many of the trading systems just count the number of positive and negative words, without any filter. She wants regulators to do more but believes that glitches and plunges may be inevitable.

"You can't ban Twitter," said Aldridge, author of "High-Frequency Trading," a guide to algorithmic trading.

Just how exactly the trading unfolded Tuesday is still a bit of a mystery.

Some experts say the computers took their cue from humans, picking up on a pause in buying as traders read the phony tweet. In Wall Street's insanely fast trading world, humans holding back for even a second could have signaled to computers that buyers were drying up and that prices could fall, and so the computers should sell fast.

Text Only
Breaking News
  • Sherpas consider boycott after Everest disaster

    Buddhist monks cremated the remains of Sherpa guides who were buried in the deadliest avalanche to hit Mount Everest, a disaster that has prompted calls for a climbing boycott by Nepal's ethnic Sherpa community.

    April 21, 2014

  • Public smoke-out marks pot holiday in Colorado

    Tens of thousands of revelers raised joints, pipes and vaporizer devices to the sky Sunday at a central Denver park in a defiant toast to the April 20 pot holiday, a once-underground celebration that stepped into the mainstream in the first state in the nation to legalize recreational marijuana.

    April 21, 2014

  • Sheriff wants OK to raise wages, keep employees

    A northern Indiana sheriff is asking local officials to lift a pay freeze that took effect during the Great Recession so he can retain employees.

    April 21, 2014

  • Woman reunited with dog, TV snatched on 1st date

    A woman has been reunited with her Yorkshire Terrier and flat-screen TV that were snatched during her first date with a man she met online.

    April 21, 2014

  • Public smoke-out marks pot holiday in Colorado

    Tens of thousands of revelers raised joints, pipes and vaporizer devices to the sky Sunday at a central Denver park in a defiant toast to the April 20 pot holiday, a once-underground celebration that stepped into the mainstream in the first state in the nation to legalize recreational marijuana.

    April 20, 2014

  • Miss America: Rethink suspension over prom query

    Miss America is asking a Pennsylvania school district to reconsider the punishment of a high school senior who asked her to prom during the question-and-answer portion of an assembly.

    April 20, 2014

  • 2 Indianapolis fires leave 1 dead, 20 displaced Two Indianapolis fires have left one man dead and about 20 residents of an apartment building looking for new homes.

    April 20, 2014

  • Ellspermann, Susan Ellspermann to deliver AU commencement address Indiana Lt. Gov. Susan Ellspermann will address the Anderson University Class of 2014 during commencement exercises on Saturday, May 10.

    April 20, 2014 1 Photo

  • 500 Festival Mini Marathon might not fill field

    With less than two weeks to go, the 38th 500 Festival Mini Marathon might not have a full field for the first time in 12 years.

    April 20, 2014

  • Turner case tests bounds of 'citizen legislature'

    When a legislative ethics panel meets this week to review the case of House Speaker Pro Tem Eric Turner, members could have trouble finding clear-cut answers, in large part because of the Indiana General Assembly's status as a "citizen legislature."

    April 20, 2014

Featured Ads
More Resources from The Herald Bulletin
AP Video
Raw: Fire Engulfs Tower Block in China Ocean Drones Making Waves in Research World Breakfast Foods Are Getting Pricier Raw: Ferry Captain Received Medical Treatment Hundreds Gather for Denver Pot Rally on Easter Transcript Reveals Confusion in Ferry Evacuation Raw: More Than 100,000 Gather for Easter Sunday Raw: Greeks Celebrate Easter With "Rocket War" Police Question Captain, Crew on Ferry Disaster Raw: Orthodox Christians Observe Easter Rite Raw: Four French Journalists Freed From Syria
Parade
Magazine

Click HERE to read all your Parade favorites including Hollywood Wire, Celebrity interviews and photo galleries, Food recipes and cooking tips, Games and lots more.
Hyperlocal Search
Premier Guide
Find a business

Walking Fingers
Maps, Menus, Store hours, Coupons, and more...
Premier Guide
Helium debate
Helium
Front page
Poll

Oscar Pistorius' murder trial has gripped South Africa and sports fans worldwide. If he is found guilty of premeditated murder he faces 25 years to life in prison. Do you think he intentionally shot his girlfriend?

Yes
No
Unsure
     View Results