The incident, which caused stock to swing more than 10 percent in early trading Wednesday, was entirely preventable, experts say.
Knight Capital has admitted that a “technology issue” in its market-making unit affected the routing of shares of about 148 stocks to the New York Stock Exchange, causing havoc to the markets on Wednesday, and riling investors as stocks swung more than 10% in early trading.
The incident was reminiscent of the 2010 Flash Crash which temporarily wiped out almost $1 trillion in market value in minutes–although stocks in the new market fiasco swung up and down, rather than just crashing.
In a statement, NYSE said it believed that its systems and circuit breakers had operated normally during early trading, a fact that likely prevented the Knight Capital fiasco from degenerating into a full-blown market crisis.
Still, how could a rogue algorithm have been allowed to disrupt the markets just two years after the infamous Flash Crash and after a number of other more recent high-profile technical glitches such as the botched Facebook IPO and the failed public offering of BATS?
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