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Stock Market Sell-Off Might Stem From Trader's Fat Finger 643

Posted by timothy
from the knight-of-the-order-of-magnitude dept.
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."
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Stock Market Sell-Off Might Stem From Trader's Fat Finger

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  • SELL! (Score:5, Insightful)

    by Skyshadow (508) * on Thursday May 06, 2010 @05:37PM (#32117702) Homepage

    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.

    • Re:SELL! (Score:5, Insightful)

      by sribe (304414) on Thursday May 06, 2010 @05:42PM (#32117772)

      Some people see disaster, some see a good buying opportunity ;-)

    • Re:SELL! (Score:5, Funny)

      by Sponge Bath (413667) on Thursday May 06, 2010 @05:45PM (#32117810)

      ...something a little more solid, like canned food and ammunition.

      You might be happier with a Whisky and Prostitutes ETF. Consult your broker today.

    • by syousef (465911) on Thursday May 06, 2010 @05:50PM (#32117890) Journal

      Might be time to invest my money in something a little more solid, like canned food and ammunition.

      Yes, because fat fingers and ammunition go together well...as long as you don't invest in a gun too.

      • Re: (Score:3, Funny)

        Don't be silly; the real problem with fat fingers is opening up the cans of food! That's what the ammunition is for.

    • Re:SELL! (Score:5, Interesting)

      by tgatliff (311583) on Thursday May 06, 2010 @05:51PM (#32117906)

      It doesnt take a genius to figure out that the "typo" theory is BS... In 2008, it was a "computer fault"... Deflation is still very much in control at the moment, and it appears that we have only delayed it. As greece and many other sovereigns start to default on their debts, we will see the leg down... Acceptance is a b&^%*& sometimes...

      • by spun (1352)

        It wasn't a typo, it was Bernie Sanders speaking for an hour on the Senate floor today, pushing for a bill to audit the Fed. Everyone who is anyone knows what we will find if we audit the Fed, and it isn't good. Not just for us, but for the world. Which is why Obama threatened to veto this bill, citing national security. The dollar is the world's reserve currency. If all the plebeians of the world found out how utterly worthless our currency is, we would suffer a crash that would make the last one look like

        • Re: (Score:3, Interesting)

          by Antisyzygy (1495469)
          What will we find? I suspect if we audited any government branch or large private company it would trace all expenditures to some rich asshats pocket.
        • by rubycodez (864176) on Thursday May 06, 2010 @07:33PM (#32119464)

          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.

        • by religious freak (1005821) on Thursday May 06, 2010 @07:34PM (#32119484)
          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.
          • No, No, No.... (Score:5, Informative)

            by mpapet (761907) on Thursday May 06, 2010 @09:43PM (#32120904) Homepage

            ? The Fed's books are already open and reviewed by accountants regularly.

            Really? Then please direct me to the assets in Maiden Lanes 1,2,3. Now, I don't mean the 'extend and pretend' valuations they report. Any external reporting is sent over with a topline valuation. Period. They do not provide enough information for any external party to establish values.

            Please direct me to FRB NY's communications, oh let's go back 5 years. I don't want it all, just the stuff where it was decided AIG's creditors were paid 1:1 for debt obligations where a haircut (pennies on the dollar) is the norm. And... what about all those side bets that were made good?

            Finally, it's not an either 'Business As Usual' or 'Politicize the Fed.' choice. That kind of rhetoric, by design, goes nowhere. Discarding the whole notion of greater transparency for the Fed has already cost us a trillion or so dollars. I'd like to use that money for other things.

            • Re:No, No, No.... (Score:4, Informative)

              by snowwrestler (896305) on Friday May 07, 2010 @11:19AM (#32127394)

              What you're asking for is not an audit, it's more like a criminal investigation or maybe a snipe hunt.

              The company I work for has its financial statements audited by an outside firm every year. At no point does that firm ask for or review 5 years worth of communications so they can see why we made the decisions we did. Strategic decision-making is management, not financials. The purpose of an audit is to make sure the numbers add up, not to second-guess management.

              You can look at the audited financial reporting of any public company and you won't get access to information like that. Why does Apple prohibit Flash on its phones? Why did Microsoft make a bid for Yahoo? Why did Google buy YouTube? The answers are not in the audited financial statements.

              People say "audit the Fed" but the Fed is already audited. What they really mean is "control the Fed" or "scapegoat the Fed" IMO.

          • by Sycraft-fu (314770) on Friday May 07, 2010 @12:43AM (#32122362)

            The problem is there are a whole lot of people who know just enough about economics to understand that money has nothing backing it, but not enough to understand that really, that's how money has generally always been. For some reason they see gold as a magical substance that cannot lose value, and that if we just had that behind currency there'd be no problems. This ignores, of course, the Great Depression, when currency was on the gold standard (and some would argue the inflexibility of it helped create the depression). They can't separate the large amount of value gold has due to its use as a financial reserve with the smaller value it has for industrial uses.

            So they have no faith in current currency, but think that a currency backed by metal would be worth something. They don't understand that money is just a theoretical construct that facilitates trade.

            It is one of the reasons that I think a basic economics course should be mandatory in high school. Too many people have their own half-assed ideas about how things work. Understanding the very basics is important, fundamentally that everything is just trade.

            • by twostix (1277166) on Friday May 07, 2010 @02:01AM (#32122832)

              You've created a strawman, attributed it to "they" and seem to be completely oblivious to the actual argument, and certainly nobody say there would be "no problems", they say it would constrain the government to only spend money that the country actually has right now.

              When money is backed by something physical it prevents the government from spending more than it has by printing (or adding ten zeros) to its bank account whenever it wants, therefore devaluing the money that is already in existence.

              You can't print gold so the government has to try a lot harder to spend money it doesn't actually have.

              That's the real point of a hard money currency system, the fact that you hear gold (and silver) all the time is that it's just a convenient, historic store of wealth, if there was something more convenient the argument would be made for that.

              Also you conveniently leave out the fact that it was while on the gold standard that the US, the UK and France became world powers, and once they went to fiat currencies became mired in debt and devaluation and lost their prosperity and declined.

              It's not about money, it's about an inbuilt restriction to preventing politicians writing blank cheques until the country is broke, like most western countries are - as we see the beginnings of with Greece, Ireland, the UK and soon The US if it doesn't get its spending under control and cut the services it can't afford.

              Finally you make it out like the current Fiat money system has proved itself superior, yet every single fiat currency in history has imploded at around 50 years due to unrelenting printing. You do realise it's only been implemented in the US for 38 years and that government spending has been increasing exponentially over that time compared to revenue? Do you think that can continue forever? Or do you think they'll get to a point and say, that's enough spending?

        • by mjwx (966435) on Thursday May 06, 2010 @11:03PM (#32121522)

          As for Greece, though, that crisis is actually pushing investors back to America.

          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.

    • Re:SELL! (Score:5, Interesting)

      by name*censored* (884880) on Thursday May 06, 2010 @05:51PM (#32117912)

      It reminds me a little of a throwaway comment Stephen Hawking made in the recent series Into The Universe With Stephen Hawking [wikipedia.org] - he was asked not to speculate on the end of the universe in a certain lecture series for fear that it would affect the stock market. Really? Even if the universe was going to end in our lifetime, and no-one had noticed before now (oops), what kind of fool would hear the news and immediately worry about his or her stock portfolio? What are you going to do with your money after the universe ends? You would think (if people behaved rationally) that the stock market would grind to a halt when every trader says "Screw this, I haven't got much time left and I'm not going to waste it here".

      • Re:SELL! (Score:5, Insightful)

        by MWoody (222806) on Thursday May 06, 2010 @07:41PM (#32119560)

        You are presented with evidence of a possible global catastrophe in a few hours. You can do one of two things:

        1) Quit what you're doing, go eat a pizza or something for your last hours alive. Maybe spend it with your loved ones.
        2) Take advantage of the panic to make a profit.

        Now, there are two possibilities here, resulting in four outcomes: a) the world ends, b) the world doesn't end.

        1a) You're dead. Who cares?
        2a) You're dead. Who cares?
        1b) You had some pizza, kissed your kids, but hope they don't want to go to college 'cause you're broke.
        2b) I'M RICH, BITCH!

        So option 1 has outcome of x% dead, y% poor. Option 2 has outcome of x% dead, y% rich. Clearly, option 2 is the better solution.

        (Yes, I know many will opt for option 1 anyway, particularly the "spend time with family" part. These people don't work on Wall Street.)

        • Re: (Score:3, Interesting)

          I very much suspect that the panic would work AGAINST the workaholic trader.

          Firstly, the only people left trading are also banking on the world not to end, so they're not going to sell cheap (or at all, your scheme relies on a bear market). The only shares that would be sold would be ones for companies that aren't expected to recover from the panic, which causes their share price to plummet, which means that if they weren't going to recover before they CERTAINLY won't recover now.

          Secondly, even if they cou

    • Re:SELL! (Score:5, Funny)

      by Stele (9443) on Thursday May 06, 2010 @05:56PM (#32117968) Homepage

      I can't be sure what happened to Procter and Gamble, but I just made a killing on pork bellies and orange juice!

    • Re: (Score:3, Insightful)

      by Red Flayer (890720)

      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.

      Well, the fat finger may have triggered the sell-off, but it probably would have happened anyway, albeit in a more controlled manner. Everyone's a little antsy with the Greece situation right now, and the market was eventually going to reflect the increased instability

    • Actually (Score:5, Insightful)

      by copponex (13876) on Thursday May 06, 2010 @05:57PM (#32117986) Homepage

      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.

      • Re:Actually (Score:5, Insightful)

        by grolaw (670747) on Thursday May 06, 2010 @06:17PM (#32118272) Journal

        That nails it. The synthetic instruments in trade now exceed the GNP of the entire planet. Smoke and mirrors - vast investments in products that have no intrinsic value - we are playing dice with the planet's economy.

        • Re: (Score:3, Interesting)

          by tibit (1762298)

          Trading of synthetic instruments is only part of the problem. There is a lot of trade in very physical things -- trade that only inflates the prices and serves no other purpose.

          Take any good condominium project. Those typically come in phases -- say buildings A&B are phase 1, buildings C&D phase 2, and so on. They are sold in pre-construction. A project that has good prospects and sells out phase 1 within say 24-48 hours -- will usually be done by a developer who has a clue, and there will be lots o

          • Re: (Score:3, Insightful)

            by grolaw (670747)

            Well, you have a point - but the risk associated with developing real property is substantial and not necessarily foreseeable or controllable by the developer (e.g. September 2008).

            Moreover, the risk is spread - typically a bank makes a construction loan that is paid off very quickly after the completion of construction - and that, in turn, means that the developer has a major incentive to line up buyers for the condo units so that they pay the developer and the construction loan issuing bank at the closing

      • by catchblue22 (1004569) on Thursday May 06, 2010 @06:52PM (#32118810) Homepage

        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.

        • Re: (Score:3, Insightful)

          If those people were really "geniuses" they wouldn't just be working for scraps of paper (which are admittedly useful for snorting coke off of hookers but that's beside the point).

          On the second thought, where would they work now that the age of independent research is mostly over? Military-industrial complex? Big Pharma? When there is nothing productive happening, maybe the smartest thing to do is have fun being unproductive.
        • by Ungrounded Lightning (62228) on Thursday May 06, 2010 @10:07PM (#32121058) Journal

          Wall Street has attracted the best and the brightest of all of our people, math PhD's, ... Our most brilliant citizens are pulled into Wall Street as "quants" ... And to do what? To game the system in favor of their wealthy masters at the expense of the middle classes.

          Then the PHBs misunderstand and misapply the PHDs' work, and the whole thing comes crashing down on them.

          Case in point: Mortgage-backed securities.

          Risk on such things is hard to estimate, because it takes a lot of investigation and skull-sweat to evaluate the risk on each mortgage. Evaluating the risk on a bundle of mortgages was so much work it was not practical.

          Then the young math whiz proved that price of mortgages was very strongly correlated with risk, and came up with a formula that, given price, estimated risk very well. (Well, DUH! They're correlated because smart buyers and sellers were researching the mortgages, determining the risk, and basing their trading prices on them.)

          THen the PHBs came up with something like bonds backed by a "basket of mortgages" (to "average out the risk of individual defaults). Buy the bonds (to finance the mortgages), get paid dividends from the borrowers' payments. Sell THREE sets of bonds against each "basket" of mortgages, with missed payments coming out of the dividends of the third, then the second, then the first, so investors could get different prices and risk/reward tradeoffs from the same basket. So far so good...

          But to sell these bonds they needed a rating. So they talked the rating companies into using the shiny new risk-estimating tool to rate them. Oops! Any controls engineer who understands these bonds and the market will recognize that this substituted a positive feedback loop for the signal from the real world. Higher price -> lower risk estimate -> higher price... (The guy who did the original work said not to use it this way - but nobody listened. And he moved on to other things.)

          And now that they could get a rating they could get a rating from reputable companies they could sell a bunch of these bonds. So they could buy up mortgages to make more. So this raised the demand for mortgages, which raised the price. The positive feedback loop was kicked off with a big up-push, the ratings went sky high, the prices of the bonds climbed, and the bubble was on.

          With the price skyrocketing more people wanted to buy in. So the demand for mortgages went through the roof. Banks and the like could sell any mortgage they could write, even to "NINJA" borrowers with no income, job, or assets. Who cares if some of the loans in the basket are "subprime"? The price says the aggregate risk is low and it will all average out, right?

          So the bubble blew up bigger and bigger, with developers building more houses that were bought by more subprime borrowers with more and more unconventional mortgages - until finally there were enough defaults to actually cause problems.

          The last straw was probably because a gas price hike made the commute expensive enough that people commuting between big cities and the "executive homes" tightly clustered in former farmers' fields a two-hour commute away from their job could no longer afford both the gas and the payments.

          So enough mortgages defaulted that some of the bonds were doing worse than expected. So the demand for them went down. Oops! The positive feedback loop was still in place and it finally got a signal strong enough to get it out of saturation. Lower demand -> lower price -> higher risk estimate -> lower rating -> lower price. Rinse and repeat. Prices for mortgages drop, interest rates rise, more defaults, more positive feedback.

          And thus the subprime mortgage market collapsed.

          (Then the government throws a trillion or so of our money into pumping it back up...)

          Now stock market guys are used to this sort of thing: It's the old chartist vs. value investor dichotomy. Every so often somebody finds a

      • Re:Actually (Score:5, Insightful)

        by roman_mir (125474) on Thursday May 06, 2010 @07:25PM (#32119346) Homepage Journal

        Except that how do you suggest getting rid of it without getting rid of the entire Economy as it stands right now on the printing press of the Governments, who are in so much debt because they all need to be reelected and thus all of their efforts are about taking on more and more debt to continue the illusion of the good times.

        Somebody will have to pay the debt. Question is: will anybody really pay it?

        Greece has no ability to print Euro (not legal ability anyway, I am sure they can print it somehow somewhere in a basement), Greeks are used to their Government handing out a pretty sweet life there. The party will last as long as someone finances it.

        US has all the ability to print the USD in the world, US is in worse shape than Greece is in terms of the total debt amount.

        Greece decided to go the unpopular road and make good on the debt and this pissed off the Greeks something awful, they don't want to pay! Their Government decided to pay 100cents on the borrowed dollar + interest. Now, the people who were lending money to Greece did the same thing that the people who lent money for the sub-par mortgages. They lent the money to Greece and probably also repackaged the debt into some SIVs and sold it off.

        This debt, all the debt of all the debtor nations, that's the stuff that fuels the markets. It's free money that is being printed, it's the crazy low interest rates that allow banks to borrow at almost nothing.

        When you have all that insane cash around, it's easy to see how it becomes target of various schemes, like betting against certain SIVs, short bets against the debt that is known not to be payable.

        However. Greece decided to bite the bullet and pay. This means cutting spending and increasing taxes.

        Will US do that when it is cornered into the same question? No. Of-course it will not. Will ANY politician in US say to the 'voters': You have to bite the bullet. There is no money for Medicare. There is no money for Social Security checks. There is no money for any Government run program. However here is a nice new tax on anything that moves, all of that so we can make good our interest and principal payments to the lenders like China, Japan etc.

        Do you believe that anybody in US will say: -Hell yes, let's bite the bullet and pay that debt!?

        NOBODY.

        Nobody will say that. The US will end up doing what it does: it will monetize the debt, print more and more USD to buy back the bonds and treasuries that will be sold off at an increasing rate, who wants the useless USD, who wants to hold the debt that is known to be paid in useless money that will inflate faster than the interest payments can ever make up for?

        This. This is caused by the Government borrowing and spending without any production to back up the transactions. Do you really think that Governments can do anything at all to stop the markets, to stop the wheel turning? The Government is NOT interested in stopping anything because it WILL trigger the sell off and decline of USD.

        However the BIG Sell Off is coming whether the Governments do anything or not.

        The difference between US and Greece is this: Greece is in Euro and cannot print, so it either quits Euro and goes back to Drachma and prints the money into oblivion causing a crash of its bonds/treasuries/currency OR Greece bites the bullet. Greek's Government for some reason decided to go the High Road and to be Honest for some reason, I need to figure it out.

        US will NEVER do this, it's impossible. It will print and print USD into hyper-inflation.

        So when you say:

        work has ceased to become a rewarded function.

        , just understand that for a Government work has ceased being a rewarded function long time ago, when the government decided it can print money and set interest rates. That's the primary problem.

        • Gotta love cynics (Score:4, Insightful)

          by sjbe (173966) on Thursday May 06, 2010 @09:43PM (#32120908)

          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 [wikipedia.org] 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.

    • Re: (Score:3, Insightful)

      by shadowbearer (554144)

        canned food and ammunition.

        Tools, guns, and garden space / greenhouses. Passive solar for heating the house... (electricity is really a luxury when you're talking about basic survival). Ammunition and the means to make your own. Etc.

      SB

  • by Renderer of Evil (604742) on Thursday May 06, 2010 @05:42PM (#32117770) Homepage

    I can relate because one time I typed :q! instead of :w, losing about 5 minutes worth of typing. The typed text had sentimental value worth billions.

  • by Wrexs0ul (515885) <mmeier.racknine@com> on Thursday May 06, 2010 @05:43PM (#32117788) Homepage

    CBC Story about software controls for selling on the market: http://www.cbc.ca/money/story/2010/05/06/tsx-markets.html [www.cbc.ca]

    Nuts to fat finger keyboards, there are automated software controls in the industry that caught-on to the sale and snowballed this individual's mistake into something really big. The issue wasn't just in this guy's mistake, but the fact that potentially billions of dollars changed hands because of a trust relationship these systems have with market indicators.

    Not that there's anything wrong with that: on a good day this could protect big firms from being the guy caught holding the bill, but I think we've discovered where the next upgrade in broker software might be :)

    -Matt

    • by SpeedyDX (1014595) <speedyphoenix AT gmail DOT com> on Thursday May 06, 2010 @05:51PM (#32117914)

      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.

      • Re: (Score:3, Insightful)

        by greg1104 (461138)

        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 s

    • Re: (Score:3, Funny)

      by wykell (1323665)
      Its not going to be an upgrade in broker software, but in broker hardware. And by that, I mean they are going to remove the fingers of the brokers.
  • by tlhIngan (30335) <(ten.frow) (ta) (todhsals)> on Thursday May 06, 2010 @05:44PM (#32117794)

    So you implement some protection. Then some prima donna trader comes by and asks that they be disabled and his trades unquestioned. If the company makes good profit off the guy, down the protection goes.

    Reminds me of this story on a commodities trader that not only didn't close his position, but actually ended up taking physical delivery of the commodity. Oops. Sure there were protections, but the guy had them disabled.

    http://thedailywtf.com/articles/special-delivery.aspx [thedailywtf.com]

    Hell, for all we know, this is exactly what happened - most traders can't enter in a "b", except a succint few well-trusted individuals. Just one of the "gods" managed to fumble it.

    • Re: (Score:3, Interesting)

      by Xugumad (39311)

      Trust me, the Daily WTF story didn't happen (if you want to, you could read about coal futures until you believe me, but I'd recommend just trusting me on this). However, I know personal trading platforms all come with "Yes, I know what I'm doing, really really really let me shoot myself in the foot" options, I can easily accept that institutional systems have the same for some traders, and even more likely have bugs in the protections...

  • by Knara (9377) on Thursday May 06, 2010 @05:46PM (#32117838)

    It may have been a system problem, that's quite possible. But institutional traders don't type in "b" or "m" next to some number they type in of stock they want.

    But even in some strange world where they did, entering in a standard lot quantity that required an "m" (much less a "b") for the stock that is suspected to be the issue at hand (PG), would result in an order that exceeded the 30-day avg vol for PG by a factor of 10.

    And that's not even considering that the firm's risk management would, in theory, have caught the issue already.

    I am, obviously, doubtful of this explanation.

    • by atomic777 (860023) on Thursday May 06, 2010 @06:06PM (#32118142)

      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"?

    • look at the volume! (Score:4, Interesting)

      by je ne sais quoi (987177) on Thursday May 06, 2010 @06:08PM (#32118172)
      Your comment is spot on. Look at the volume of shares traded for PG today [google.com]. There is no statistically significant spike in volume today that correlates with the price drop. If the sell was staggered, the price drop should have been staggered. Since it isn't, either Google's volume is way off or this story is a crock. Based on the volume data, the sell-off started well before the major drop in stock price.

      I suspect that something funny did happen though, in TFA they are quoting that PG was trading down at $30 per share at some point, so something definitely slipped. Fortunately, we managed to avoid another Black Monday [wikipedia.org], where the DOW went down and stayed down.
  • by tekrat (242117) on Thursday May 06, 2010 @05:47PM (#32117846) Homepage Journal

    They've been saying for some time the market was due for a correction. Mind you, at the height of the financial meltdown, the Dow was at 6500, and has almost doubled value in about a year, it was rising too fast considering that the recovery still really hasn't come (i.e., there are still no jobs).

    The only people making money are the same ones that are always making money -- the fat cats. Now it looks like the market will correct, and probably stablize around 10k, maybe 9. And even more people will lose their jobs and the cycle will continue until America admits that it is bankrupt.

    Then will come some really hard times, but, once we address the real issues plauging the country, we'll come out of it stronger. But first, we need to start getting rid of all the lawyers....

  • by fuzzyfuzzyfungus (1223518) on Thursday May 06, 2010 @05:49PM (#32117884) Journal
    Not that there isn't some finance-clippy that pops up and asks "You appear to be tanking the Dow, would you like help with that?", or that people are allowed to do whatever stupid shit they want with the assets they have(the amount of stupid shit that people are allowed to do with assets that they don't have is somewhat concerning, however).

    However, I am somewhat surprised that the guys who do UI design for financial systems don't design systems to make things like power-of-ten or million/billion errors very difficult. Having a 3 factors of 10 difference be just one key away(and phonetically not all that dissimilar) seems like a mess waiting to happen.

    I've seen in doctor's offices(and I know pharmacists and pharmacy techs, especially ones where compounding and other tougher than "dispense stock pill" type activities go on get drilled hard on this) outlining acceptable and unacceptable notetaking protocols to reduce the risk of power-of-ten dosing errors(things like ".2 is wrong, there should always be a leading zero to clue you in to the decimal point, use 0.2.") Some of them are even domain specific conventions, specifically trading off other factors in favor of reducing the risk of error. In science, for instance, saying 2.0, or even 2.0000 if you have that much precision, instead of 2 is a good thing. It tells your reader how precise the value they are looking at is. In prescriptions and medical notes, "2.0" is dangerously close to "20", and is thus avoided.

    One would think that, even if it meant making up arbitrary symbols, or using UI element sizes to convey magnitudes, or something, financial UIs would adopt a similar set of domain-specific tricks to head off the most common and dangerous errors.
  • by Locke2005 (849178) on Thursday May 06, 2010 @05:50PM (#32117894)
    If they were running Vista, they would have to click through "Are you sure you want to do this?" and "Are you really sure you want to do this?" popups, as well as a popup of Clippy asking "It looks like you are trying to trigger a stock market panic. How can I help?" No fat-finger problems there!
  • by lanner (107308) on Thursday May 06, 2010 @05:53PM (#32117940)

    You read that headline right. This should happen ALL THE TIME. It would be good for the markets.

    Speculators would be driven out, or driven insane. Emotionally driven traders would have heart attacks.

    Sound judgments made based on factual data would not be affected.

    Next week, people like me won't give a toot that this ever happened. However, a lot of day traders just pooped their pants. I'm buying men's underwear stocks.

    The person who made the mistake will be punished dearly.

  • by Anonymous Coward on Thursday May 06, 2010 @05:53PM (#32117944)

    Shouldn't this hot topic be debated on /. in, say, a week?

  • by burni2 (1643061) on Thursday May 06, 2010 @05:57PM (#32117976)
    because in central EU(let me speak for Germany) - 10^6 is a "Million" you would say million (we all agree) - 10^9 is a "Milliarde" you would say billion - 10^12 is a "Billion" you would say trillion We also have a trillion but if our state debt would be measured in trillions of euros, we all would have "fun" like in the 1930s. Ok this is totally missing logic, he just had fat fingers.
  • by Chad Birch (1222564) on Thursday May 06, 2010 @05:57PM (#32118000)
  • by Anonymous Coward on Thursday May 06, 2010 @06:06PM (#32118140)

    What's being talked about here isn't the general decline in the market today, but a very suspicious "blip" that occurred in a huge number of stock prices at 2:45 EST, followed by immediate recovery.

    Look at the blip:

    Adobe [google.com]
    Google [google.com]
    Westlake Chemical [google.com]
    Cabela's Incorporated [google.com]
    Apple [google.com]
    Microsoft [google.com]
    Titanium Metals [google.com]
    Fidelity IIS [google.com]

    This shit is across the board, with very few exceptions. You try explaining how something like that happens apart from some major fuckup somewhere.

  • See?! (Score:5, Funny)

    by GrumblyStuff (870046) on Thursday May 06, 2010 @06:07PM (#32118152)

    Obesity is destroying America!

  • by erroneus (253617) on Thursday May 06, 2010 @06:14PM (#32118246) Homepage

    We all know this and have known this for decades. The people who operate within the market like to think of themselves as sensitive to trends and currents and activities, but the reality is further from the truth -- a bunch of people doing what everyone else is doing hoping that the person in front of them knows where they are going.

    The cure for much of this (not all of it) is setting up rules that limit the number of times a single item can be bought or sold in a day. Whatever the real "best solution" is (and I'm sure my notion isn't even close) it should probably focus on getting rid of the lemming factor that tends to send people marching off the edge of a cliff taking the whole market with them.

    • Re: (Score:3, Interesting)

      by Lehk228 (705449)
      stock orders should be processed only at certain times in batches. different stocks could be on different batch cycles, 1 day, 2 day, 5 day, 7 day, 30 day cycles. a sell order would be a certain number of stocks and a buy order would be a certain amount of money.
  • by by (1706743) (1706744) on Thursday May 06, 2010 @06:18PM (#32118292)
    On the Dvorak keyboard [wikipedia.org], B is right next to M. That said, I use Dvorak, and have never personally caused a stock market fiasco. Maybe I should change professions...
  • Rubbish (Score:5, Informative)

    by Dunbal (464142) * on Thursday May 06, 2010 @06:31PM (#32118494)

    15 billion dollars cannot move the markets that way, even if it was an accident. That's like trying to blame 2008 on the fraudster at "Societée Generale". It wasn't just the US stock market, it was all the currency markets too. This is trillions of dollars we're talking about, moving away from the Euro and the US dollar and into Asian currencies. The trouble in Greece and the uncertainty about the UK elections were the excuse. The Chinese made a major move into the Japanese Yen yesterday, strengthening it. Today european bankers followed suit. As a result the Yen gained nearly 10% against the dollar, with Cable (GBP.USD) and Fiber (EUR.USD) dropping quite a bit too. This panicked the equities markets.

  • by 3seas (184403) on Thursday May 06, 2010 @07:02PM (#32118990) Journal

    Naw, its Goldman Sachs selling their holdings to pay for lawyers.

  • That's ... (Score:5, Funny)

    by PPH (736903) on Thursday May 06, 2010 @08:57PM (#32120454)
    ... a butherfucking mig bistake!
  • by moeinvt (851793) on Thursday May 06, 2010 @10:58PM (#32121470)

    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.

I'd rather just believe that it's done by little elves running around.

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