News

Machines "Take Over" New York Stock Market, Cause Crash

| 7 May 2010 20:22
image

The U.S. stock market got a small taste of the robot apocalypse on Thursday, when a near-catastrophic 1,000-point market crash was attributed to computerized sell-offs.

The economy here in the States (and mostly abroad) seems to be on the rebound from the recession that started back in 2008, but you wouldn't know it by looking at Wall Street. Markets plummeted almost 1,000 points in less than half an hour today - a tenth of the total value - leading to one of the most "turbulent" days ever in the history of the stock market, though the market had recovered roughly 2/3rds of the drop by the close of trading.

The reason? No, it wasn't a big bank going under. It wasn't poorer-than-expected Q1 financial information. The reason for the massive crash may well have been ... computer error as autonomous trading ran amuck.

Nobody is quite sure what happened yet, though it seems certain now that automated processes were resulting in "erroneous trades," possibly resulting from a typo: A situation being investigated is that a trader, meaning to sell $16 million worth of futures, accidentally put in a transaction to sell $16 billion worth of futures. Such a massive sell-through did not go unnoticed by the machines running these things, and it snowballed from there.

"I think the machines just took over. There's not a lot of human interaction," said Charlie Smith, the CIO (Chief Investment Officer) at Fort Pitt Capital Group. "We've known that automated trading can run away from you, and I think that's what we saw happen today."

The machines have our economy in their silicon grip. How much longer until they decide to revolt for real?

(NewsOK)

RELATED CONTENT
Comments on