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Though Knight didn't provide details on what happened, much of these glitches stem from issues related to the computers and algorithms that power the world of high-frequency trading, where millions of trades are conducted in nanoseconds. Most of the volume of stock trading comes from such computers. Because machines conduct these trades, the propensity of malfunctions is high, since humans can't put a stop to these trades until it is too late, or the damage is already done. Such glitches can hurt investors, especially those that may have had placed automatic orders with their brokers to sell stocks that hit a certain price. The Securities and Exchange Commission was involved in the looking into the matter throughout the day, spokesman Kevin Callahan said in a statement. "As is our practice, we are closely monitoring the situation and in continuous contact with the NYSE and other market participants," Callahan said. People like Hunsader, Arnuk and others have been calling for better oversight of practices that lead to such glitches. "High-frequency trading, the idea that computers and algorithms are trading very rapidly in the marketplace and putting pressure on the system, absolutely is something that ultimately needs to be addressed," said Matthew Rubin, director of investment strategy at Neuberger Berman. The disruptions occurred, ironically, on the same day that the Securities & Exchange Commission published a final rule aimed at preventing trading disruptions like the May 2010 "flash crash." The new rule establishes a single, consolidated record of all the trades on a given day.
Arnuk wondered why the public companies tolerate such market movements that hurt the prices of their stocks. "It's time to stop punting and enact regulation that restores confidence in the markets," said Arnuk.
[Associated
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