We live in a golden age of information dissemination and stock liquidity, in which news moves faster than earthquakes and high-frequency-trading robots can trade faster than you can blink, meaning that the next time there’s an earthquake your 401k will have bought construction stocks and Twitter even before you stop shaking.
But we’re also living in a golden age of misinformation, where you can find someone to publish pretty much any rumor you want, and those rumors can move markets up or down instantly. And for some reason the robots who’ve been put in charge of markets seem to be not dispassionate calculating machines but rather touchy C-3PO types, and can exacerbate the speed and severity of crashes with their hypersensitivity. But the upside should be that the recovery from millisecond crashes should be similarly quick – once misinformation is corrected, the robots should dry their tears, blow their noses, and bid prices back up in a few more milliseconds.
Maybe not so much. Three New York Fed researchers looked at a particularly silly case:
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After decades of responding to tips about fraud by writing notes on napkins and then throwing them away, the Securities and Exchange Commission finally got itself some computers and is excited to put them to use. Legitimate use. First up: figure out if maybe the computers are in fact the problem.
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Gian-Paul Caccia of Wolverine Trading, a high-frequency trading firm, won [last night's JPMorgan] corporate challenge for the second year in a row with a time of 17:05 minutes, according to the unofficial results. Emily Mareb of Bloomingdales was the fastest female racer, with a time of 21:02 minutes. [Dealbook]
The EU is hopping on the let’s get after the-high-frequency-trading bandwagon and has started to investigate the practice. Bloomberg reports that the European commission met with industry representatives in Brussels on Jan. 11 and that the talks are part of an information-gathering exercise. In the US, the practice, which accounts for 50% to 60% of equity market trading volumes, has been under fire in the past months as regulators are calling for more stringent oversight.
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