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Sharp stock market drop likely human, computer error
By Lucas Mearian
The Dow Jones Industrial Average
plummeted almost 1,000 points in a
half-hour today, the cause of which appears to be human error
exacerbated by a market made more volatile by high-speed trades and
automatic sale orders that are measured in milliseconds.
Sources said a trader attempting to
short-sell 16 million shares of
S&P 500 stock, possibly involving Proctor & Gamble profits,
entered a "b" for billion instead of an "m" for million. That error
sent high frequency traders scurrying, causing liquidity to vanish.
fell as low as 9,867 points from its previous day's close of 10,868
before rebounding to 10,464 points by the close of the market today.
Chris Nagy, managing director of
order routing strategy at TD
Ameritrade, was moderating a panel on market structure at a trade
operations conference at about 2 p.m. EST, when he was notified of the
"It seemed a little suspicious at
the time. That's our conclusion,"
Nagy said. "But we've warned the SEC [U.S. Securities and Exchange
Commission] of a lot of the problems created with some of the
high-frequency trading in the marketplace."
"When you have some algorithmic
error, which this is appearing to
be, the impact of that trade caused the pricing in the markets to
collapse," Nagy continued.
For example, Nagy said some of TD
Ameritrade's client orders, where
the normal price of the stock was $60, received trade fulfillments at
In another example, The Wall Street
blog reported one stock price on Accenture's platform plummeted
from over $40 at 2:47 p.m. to $.01 at 2:48 p.m. today.
"So clearly there was a flaw in the
system and there were some
algorithmic events that triggered a much more cataclysmic event in the
marketplace," Nagy said.