Stock trading glitch spooks investors again

Traders work on the floor of the New York Stock Exchange on August 1, 2012 in New York City. Knight Capital’s faulty software sent trading haywire and could sink the brokerage firm. Is technology helping or hurting investor confidence?

Tess Vigeland: Have you heard anything lately that makes you just want to jump into the stock market? Nah, we haven't either. Especially not this: A major brokerage firm is struggling to stay afloat today after losses caused by a software glitch. Knight Capital's problem prompted wild price swings yesterday right after the stock market opened. You could say that "glitch" cost the company $10 million a minute.

Things eventually returned to normal -- in the market, at least. But it doesn't mean everyone feels settled about it. Our New York bureau chief Heidi Moore reports.


Heidi Moore: There’s a reason that there’s no show on TV called "CSI: Stock Market": When computer glitches screw up trading, there’s usually no way to tell what went wrong and no way to ensure it won’t happen again.

After bad software at Knight Capital wiped out $440 million in 45 minutes, I called Dan Goldie, an independent financial adviser in Silicon Valley.

Dan Goldie: People feel like markets really are stacked against them.

Facebook’s IPO was also wounded by faulty technology. Financial adviser Greg Evans, who’s with Raymond James, says the frequent computer failures in the stock market unnerve his clients. This latest snafu made him think of the moment in the movie "2001: A Space Odyssey" when a computer takes over from its human master.

“2001: A Space Odyssey” clip:  I’m sorry, Dave. I’m afraid I can’t do that.

Greg Evans: The client concerns revolve around this notion that something larger out there is steering the ship and nobody really has a sense as to the magnitude of the problem.

Sal Arnuk, with Themis Trading, says that even professional investors are wary of the inexorable march towards greater trading technology.

Sal Arnuk: The talk among professional investors is they’re scratching their head and thinking, maybe all this high speed back and forth, maybe that’s not been such a good idea.

Knight Capital is paying the price. Its shares lost their half their value today and the company is looking for a white knight with deep pockets to save it.

In New York, I’m Heidi Moore for Marketplace.

About the author

Heidi N. Moore is The Guardian's U.S. finance and economics editor. She was formerly the New York bureau chief and Wall Street correspondent for Marketplace.

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