US stock plunge raises alarm on algo trading: It’s looking like an error caused the crazy drop on Wall Street today.
Some technical problem caused Proctor and Gamble stock to appear to lose 37% of its value in a matter of minutes. Since the vast majority of trades are automated these days, a million different algorithms triggered and computers around the world started selling like crazy.
A spine-chilling slide of nearly 1,000 points in the Dow Jones Industrial Average, its biggest intraday points drop ever, led to heightened calls for a crackdown on computer-driven high-frequency trading.
[…] the follow-through selling that pushed stocks of some highly regarded companies into tailspins exacerbated concerns that regulators can quickly lose control of the markets in a world of algorithmic trading.
The WSJ reports that they saved the day by suspending electronic trading briefly and making actual, real-life humans come together to buy and sell, at which point everyone figured out something was seriously amiss.
[…] because the stock fell below a key circuit-breaker level called the “liquidity replenishment point” or LRP on NYSE, the exchange stopped its own electronic trading in the stock briefly to go into “slow” mode. Under that mode, the designated market makers on the NYSE floor are given an opportunity to come in on the other side of an order at a price they have time to think about.