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Rouge Computer Traders

06 Oct 2010

The automated computer systems that trade stocks at high speed is a disaster waiting to happen. New York Times now has an article about how a 600 point drop of Dow Jones in minutes back in May was the result of these programs.

The mutual fund started a program at about 2:32 p.m. on May 6 to sell $4.1 billion of futures contracts, using a computer sell algorithm that over the next 20 minutes dumped 75,000 contracts onto the market, even automatically accelerating its selling as prices plunged.

I still don’t get how this is legal.