Conspiracy Theory: “Rogue Algorithm” Was No Accident.
- Posted by chicagosean
- on August 1st, 2012
Wild action affecting NYSE stocks today. From Wall Street Journal:
Wild swings in several stocks have the market abuzz this morning.
Initial signs pointed to a rogue trading algorithm, traders said, though the origins of the swings were unclear about an hour into Wednesday’s session. NYSE Euronext said in a note to traders it was “reviewing trades in 148 symbols between 09:30:00 a.m. and 10:15:00 a.m. ET.”
Several traders have pointed to big stock moves on no news, including RadioShack, Quicksilver Resource, Magnum Hunter Resourcesand Dole Food, among others.
Some traders have pointed the finger at Knight Capital, a market making firm on the floor of the New York Stock Exchange, for the issues. A Knight Capital spokesperson said the firm is looking into stock-trading irregularities.
Knight shares are down 11% at $9.22.
“Lotta odd dislocations in the market,” said David Lutz, a trader at Stifel Nicolaus. ”All chatter, but FYI if you have crazy moves.”
An NYSE spokesperson declined to comment.
Looks like there may have been as many as 140 stocks affected.
I’m writing this piece because I want to go on record as suggesting that today’s “Rogue Algorithm” trading incident was no accident.
Somebody knew exactly what they were doing, and made a fortune doing so. And it felt like a trial run for something much much bigger.
The exchanges wanted more volume. Careful what you wish for.
Ok, so as everyone now knows… turns out Knight Capital’s algo fucked up. Fine, but still – SOMEbody (as of yet, unnamed) was on the other end of the $440,000,000 Knight claims to have lost in the fiasco. Perhaps the other side of those trades were offshore accounts HQ’d in the Cayman Islands and controlled by Knight? (I just can’t help myself with these conspiracy theories…)
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Sean McLaughlin - Editorial, Curation, & Investor Relations Solutions at StockTwits. Also, former Member of the Chicago Board of Trade who trades his own account in Boulder, Colorado. More »
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