Today started off as any other Saturday day. Peter refereed a rugby game and I did the shopping and had my hair cut. My hairdresser Sally (who is rumoured to be ‘the Nanny’ Fran Fine’s sister) had been on vacation in the Dominican Republic and it was interesting to hear about that country from her point of view. I returned home with my ‘big’ hair as a huge thunder storm passed over NYC.
After discussing the effect of disasters like the garment factory in Bangladesh on the US economy and more specifically company share prices yesterday, I was interested to read an article today about the power of Twitter. In an NY Times article ‘Twitter Speaks, Market Listens and Fears Rise’ by Amy Chozick and Nicole Perlroth points are discussed whether the global economy could or is in fact hinging on 140 characters?
“That is the question the financial industry and government regulators are trying to answer after a Twitter hoax on Tuesday that claimed President Obama was injured in an explosion at the White House. That report caused the Dow Jones industrial average to drop temporarily by 150 points, erasing $136 billion in market value. The markets recovered in minutes, but the episode has heightened concern among regulators about the combination of social media and high-frequency trading.
The vulnerability, in part, stems from the Securities and Exchange Commission’s decision this month to let companies and executives use social media sites like Twitter and Facebook to broadcast market-moving news. High-frequency trading systems are designed to make trades based on keywords within milliseconds. The hoax message also went out on a new feature on Bloomberg’s financial data terminals that delivers select Twitter posts to hedge funds, investment banks and other users.
On Tuesday, the Commodity Futures Trading Commission plans to hold a public meeting in Washington with a couple of dozen high-frequency traders to discuss whether there should be additional safeguards to protect against the effects of social media on markets. Even as markets rebounded on Tuesday, some investors lost money on the quick decline while others made money if they bet on a sharp drop.”
Despite an extensive review in 2008, it stuns me to learn that there is currently no device to protect the stock market with regards to unethical practice and high speed trading technology.
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