Knight Capital glitch triggers wild stock swings
While it wasn't another Flash Crash, the odd volatility that hit 150 Big Board stocks this morning was enough to get people buzzing all over again about the degree to which the market is deleteriously affected by algorithms and high frequency techniques.
The culprit seems to be Knight Capital, one of the companies quick to (rightfully, as it turned out) point the figure at Nasdaq OMX for its technical glitches surrounding the Facebook IPO. Now the tables are turned, and market participants are pointing the finger at Knight Capital for some odd volatility.
Knight said it indeed had a few technical issues and asked that customers re-route orders for these stocks. The nature of these difficulties remains a mystery.
Bloomberg reports that "trading was halted on at least six stocks on the NYSE after they tripped so-called 'circuit breakers' designed to prevent surges and plunges linked to unusual trading. China Cord Blood Corp. soared more than 150 percent; CoreLogic Inc. fell more than 11 percent; Trinity Industries Inc. rose 17 percent; Kronos Worldwide Inc. climbed 19 percent; and Molycorp Inc. fell almost 18 percent."
One issue here is whether price bands--the coming-soon vaunted limit up/limit down approach--would have worked any better in this situation. There have been enough trading anomalies the past few years that concern is definitely warranted. The case for CAT gets even stronger.
CAT systems on the way
Update: CAT coming soon