Algorithms or human error to blame?

Algorithms or human error to blame?

www.msnbc.msn.com

A one-letter difference, perhaps mistakenly entered on a computer or phone keyboard, could have caused the stock market to plummet and panic Thursday, but it also brought renewed attention to the perils of computer-driven trading.

"The potential for giant high-speed computers to generate false trades and create market chaos reared its head again today," said Sen. Ted Kaufmann, D-Del., who has long pushed for more government scrutiny of what is known as "high frequency trading" that is made possible by computer-driven trading algorithms.

"The battle of the algorithms — not understo

(visit the link for the full news article)


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[edit on 6-5-2010 by theability]

It seems the benifits of software have caught up to the stock markets, taking the human decisions out of the loop, causing quite the issue today as seen on the markets. If you ask me this is scary due to the fact that the problem arose from lack of oversight and human internvention in the trading software that has been sold around the globe. Can you image the damage that could be done if these software system were mae to crash the markets on purpose? I hope the oversight comes sooner than later, since all we need is the great crash now.

www.msnbc.msn.com
(visit the link for the full news article)

reply to post by theability


I think there is a real danger in automated trading systems; clearly that's not just a potential danger -- it's real, as it happened today.


Now, how do you solve the problem -- that's the real question. Not an easy one to answer, either.

reply to post by Kaytagg

Now, how do you solve the problem -- that's the real question. Not an easy one to answer, either.

I had no idea that this was such a problem. Yet someone should have seen this coming.

well, earlier they said it was "fat finger syndrome" they call it, when someone presses the wrong key...

you know, like a b instead of an m

They are full of **&#, the market was manipulated today on purpose, or the truth is being held from us.

These lies are called, DAMAGE CONTROL.

[edit on 6/5/10 by xstealth]

reply to post by xstealth

They are full of **&#, the market was manipulated today on purpose, or the truth is being held from us.

My feelings exaclty. Installing false confidence and them pulling the plug! Eye opening indeed!

Scary!

This was an eye opener for me as i was not even aware this sort of software was in use, let alone used by a majority of home traders.

As you say, the potential for harm is immense, and we all know how easy it is to gain access to someones local machine (or even gain access to the servers this software operates through). In saying that, wouldn't it be easier for someone to "hack the market" at it's source? rather than manipulating local machines?
I don't really know how it's all run, is there a large system somewhere that stores all the market data collectively? Surely if you gained access to that machine, a few edits here and there could do the same job.

[EDIT]
I'm referring to this comment from the source article

"The potential for giant high-speed computers to generate false trades and create market chaos reared its head again today,"

I just dont see much point in the PTB fiddling with software on peoples home computers, why not just manipulate it manually at the source?
[/EDIT]

This is how i would do it if i wanted to cause havoc on the market and had the appropriate skills / access / technology. So isn't it possible they're just using the software as a scapegoat?

Just some thoughts I had on the topic.

Thanks OP for this enlightening article, gets a star, flag and from me.

[edit on 6/5/2010 by noomy]

Asian stocks are down now over 3.5%!!

They must have fat fingers over there too

reply to post by noomy

As you say, the potential for harm is immense, and we all know how easy it is to gain access to someones local machine (or even gain access to the servers this software operates through). In saying that, wouldn't it be easier for someone to "hack the market" at it's source? rather than manipulating local machines?

Would this be a major concern? Viruses running on a day trader machine causes markets to crash?
So how far fetched are this ideas or theories??

Maybe they have been realized already!

ahhhh..

Originally posted by xstealth
They must have fat fingers over there too

Lets wait and see how many times they try to pull this excuse in the coming weeks eh?

Without question, the scenario mentioned on certain media outlets was a fabrication. There are measures in place to prevent 'accidentally' selling billions. Citigroup has said they didn't do it, and that was what they claimed on MSNBC.
Look at the Audit the Fed bill and what has happened today.
Morning: Sanders amendment still in place, with support.
Afternoon: Market plummets, Audit the fed gutted, Obama speaks against audit the fed....

Such a week: TPTB trying to overshow the oil spill this way?

Sorry that was a bit sarcastic but still?

The foreign markets will be a show to watch tonight.

reply to post by time91


Agreed, I cannot imagine there are no verification checks or input validations built into the software. "Oh whoops, we hit the "b" button for billions by accident." does NOT fly with me.

Everybody that follows Elliott Wave knew the market was on the verge of falling big, and too many systems had the same "when this happens, sell" switch set to a sensitive setting so to speak.

Now the cat is out of the bag and the cover story is a laugh. If I were still in the market, I would be selling once this little bounceback is complete.

reply to post by theability


I was talking about this :

"The potential for giant high-speed computers to generate false trades and create market chaos reared its head again today,"

Seemed they were suggesting the software on day-traders home PC's could be responsible for massive "accidental" shifts on the market.

So assuming that local machines COULD be responsible for mistakes aka fat finger syndrome, couldn't someone (PTB?? malicious hackers??) gain access to said machines and do this themselves?

I'm suggesting maybe it wasn't a typo, but then I'm thinking "why do it on someones PC, why not just manipulate it at the source". If you have the power to control someones machine and place "false" or "accidental" bids, couldn't you theoretically just log in to wall street and ...add a zero here, move a decimal point there, and have the same effect?

reply to post by noomy

I'm suggesting maybe it wasn't a typo, but then I'm thinking "why do it on someones PC, why not just manipulate it at the source". If you have the power to control someones machine and place "false" or "accidental" bids, couldn't you theoretically just log in to wall street and ...add a zero here, move a decimal point there, and have the same effect?

Maybe the trading system at the source has limit controls embeded so that exactly what your suggesting isn't possible, thus having the trading software be the source of the ordeal.

I don't know. Truthfully I had no idea this trading software issue was so large before today.

Originally posted by theability
Maybe the trading system at the source has limit controls embedded so that exactly what your suggesting isn't possible

This is indeed possible, and i agree with you, i had no idea it was like this.

On a side note, i actually have no clue how the system works, so what I'm suggesting might just be crazy talk...it's just a theory.

reply to post by noomy

This is indeed possible, and i agree with you, i had no idea it was like this. On a side note, I actually have no clue how the system works, so what I'm suggesting might just be crazy talk...it's just a theory.

Hey we agree 100% I have no idea how they run things. Maybe now I should learn!

Originally posted by theability


Can you image the damage that could be done if these software system were mae to crash the markets on purpose?

Actually... It's possible that this was done on purpose.... When the markets are running low, all you have to do is push it just a little bit more and it triggers algos.... We've known about this for years.. We've even put circuit breakers in place... Problem is.... We don't move fast enough... We need to learn to detect changes like this in milliseconds... And then figure out how to handle it better than simply closing trading for a while....

Originally posted by xstealth
well, earlier they said it was "fat finger syndrome" they call it, when someone presses the wrong key...

you know, like a b instead of an m

They are full of **&#, the market was manipulated today on purpose, or the truth is being held from us.

These lies are called, DAMAGE CONTROL.

[edit on 6/5/10 by xstealth]

It's one thing to suggest that might have occurred, it's a complete other to be so certain without direct knowledge...

Be careful... You are starting to sound certifiable

reply to post by HunkaHunka


Hey, these trading programs, do they have any kind of trading fail safes at all? So anyone with a bit of spending cash can purchase this stuff? No training required?

To give you an idea, I spend alot of my time with technology and space, not wall street if you can relate to the analogy.