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Wall Street breathed a little easier and the end of trading Thursday. The Dow Jones Industrial Average was only down 348 points. Earlier in the day the stock market dropped dramatically — 1,000 points and nearly 700 points during one panic-stricken stretch. 296 stocks that fluctuated most were canceled for trade by Nasdaq on Friday. It ends up having been a toxic combination of algorithmic, or high speed, trading and fearful investors may be the culprit.

Panic at high speed on Wall Street

A Wall Street system that was created to prevent what happened to the stock market Thursday may have actually caused it to happen, thanks to high speed trading. When a stock price falls quickly, the number will trigger a “circuit-breaker” that briefly halts New York stock exchange trades with it. CNN Money.com reports that at about 2:45 p.m. on Wall Street, shares of Procter and Gamble fell around 10 percent. The breaker stopped NYSE trading on it for around 80 seconds. During that time, the stock was in high speed play on other exchanges.

High speed trading – how does it work?

The NYSE, although they are down 400 points, took a huge breather with P and G, Accenture, Boston Beer Co., and others. There were investors in the meantime that were afraid the Greek debt crisis would need them in need of faxless payday loans and were trying desperately to sell them. How does high speed trading work anyway? There are automatic programs in some people’s computers that began issuing tiny orders every millisecond. The computers had no offers to buy for stocks that had hit their NYSE circuit breaker. High speed trading ended up seeing the bid at $ 0. To make a commission on every deal, the high speed trading computers are designed to add a penny to each trade. The high speed software then placed many bets at 1 cent. Many stocks traded all the way down, triggering a massive sell-off.

High speed trading crackdown?

People are calling for a crackdown on high speed trading after the panic on Wall Street Thursday. Reuters reports that the massive sell-off that pushed the stock of highly regarded companies into a tailspin showed different concerns that regulators can quickly lose control of the markets in the world of high speed trading. Democratic senators Edward Kaufman and Mark Warner said Congress needs to investigate the causes of the market plunge, which at its deepest point wiped nearly $ 1 trillion off equity values.

What is high speed trading?

On Wall Street, high speed trading has caused average daily volume on the stock market to explode. The New York Times reports that powerful computers have the ability to enable high-speed traders to transmit millions of orders at lightning speed and reap billions at everyone else’s expense. Stock exchanges say that high speed traders are more than half of all trades that are done. What is high speed trading? It is a compilation of computers that are so fast they outsmart investors, man, and machine. Apparently they also can outsmart and outrun themselves.

Resources for the article

CNN Money.com

http://money.cnn.com/2010/05/07/markets/explaining_wall_street_turmoil/?npt=NP1

Reuters reports

http://www.reuters.com/article/idUSTRE6455ZG20100506?loomia_ow=t0:s0:a49:g43:r2:c0.099358:b33744350:z0

New York times reports

http://www.nytimes.com/2009/07/24/business/24trading.html

Tags: Faxless payday loans, high speed trading, high speed trading software, Trading error