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

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.'"

Re:First for banning HFT

[noh8rz10]

internet prank with stock market side effects, or intentional market disruption and subsequent gain? btw this is why I don't read tweets.

Get rich quick scheme?

[almitydave]

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

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[account_deleted]

Comment removed based on user account deletion

1927 + 2 = 1929

[maxwell demon]

"The last time the Dow rose for 15 straight Tuesdays was in 1927."

And two years later it crashed.

Re:First for banning HFT

[llZENll]

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.

Re:First for banning HFT

[TsuruchiBrian]

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.

Exactly, put a gambling tax on it

[dutchwhizzman]

Don't ban it, tax it as gambling. 50% of profits go to government, losses aren't deductible. If you buy a stock and sell it again within a week, it's considered speculation and subject to gambling tax. This will make high volume trading not impossible, but much harder to actually make a profit with, while actual investors in stock that think companies will make money by honest profits are protected. This is for stocks. Any derivatives are by nature all speculation and should be taxed regardless of how long they are held before being sold, bought or exchanged for actual stock or product.

Re:First for banning HFT

[NatasRevol]

My uncle-in-law retired early, and well off, by writing scripts that key off certain reports & keywords. Trades in before actual people can, then trades out after ~1/4% change.

Re:Wow!

[kilfarsnar]

Here ya go. That wasn't hard.

http://www.globalresearch.ca/computerized-front-running-and-financial-fraud/18809

http://247wallst.com/2012/12/04/high-frequency-trading-a-grave-threat-to-the-markets-and-the-economy/

Re:First for banning HFT

[alexander_686]

Let’s see, when France enacted their Tobin Tax, prices went down, liquidity went down, and volatility increased. And I have seen studies that argue the opposite.

I don’t think a Tobin Tax is the answer. It is often put forward by people who are suspicious of the chaotic energy of the market and of wealthy people – suspecting it is just a game of no real value. I would say that you were treating the symptoms and not the disease – expect that I am not even sure what the symptom or disease they are trying to cure.

Why not tackle the issue from the other end? For example, index long term capital gains to inflation. This would encourage investors to hold their positions for longer.