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emeline

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Aug 23 10 12:54 AM

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Flash CrashThere is, however, a darker side to this rush to computerise.For example, accidents can happen.Last August, the hi-tech financial firm Knight Capital was brought to the verge of bankruptcy by an algorithm that went haywire, racking up more than $440m of losses in just 45 minutes before it was switched off.Perhaps the most famous mishap was the now legendary Flash Crash, at 2.45pm in New York on 6 May 2010.In a few minutes the New York Stock Exchange plunged, and then just as suddenly recovered again. Share prices in some firms, such as the consultancy Accenture, plummeted to a fraction above zero, while Apple soared to $100,000.For months afterwards, nobody could explain what had gone wrong.image For days afterwards, the New York Flash Crash of 6 May 2010 left investors and regulators perplexedThe official US regulatory investigation said it had been triggered by a single order, placed by a large institution, using an algorithmic trading strategy.

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http://www.bbc.co.uk/news/business-23095938
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periol

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Aug 23 10 7:04 PM

there's a bit of a meme out there in the MSM right now.  interesting...

The computers that run the stock market
http://money.cnn.com/2013/07/08/investing/stock-market-citadel/index.html?iid=HP_LN

Welcome to the new world of trading: More and more, high speed computer programs are replacing thousands of floor brokers once seen running and yelling across the floor of the NYSE.Citadel's "floor" brokers don't do a lot of running. They sit together behind rows of computer terminals, clicking away on keyboards to ensure the firm's computers are operating correctly and are connected to all the right exchanges.

In essence, Citadel's proprietary computer programs have become the new eyes, ears, and brains of the U.S. stock market.  About 20 programmers create the computer algorithms that decide how to execute each order, and what to send to public exchanges or so-called dark pools.

Dark pools may sound like the favorite haunts of Star Wars villains, but they are simply venues where buyers and sellers can submit bids without disclosing them to the public markets. Citadel operates a dark pool called Apogee out of its New York office.

Citadel's programmers are constantly making adjustments as computers "learn" customer behavior to make the process more efficient.

"All the decisions are made by the computers," Jamil Nazarali, Citadel's head of electronic execution, told CNNMoney during an exclusive behind-the-scenes tour. "The people here are not making any decisions with respect to whether an order should be filled or at what price it should be filled. That's all done in an automated way."
 

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