Salient to Investors:
Gregg Berman at the SEC’s Office of Analytics and Research said most mini-flash stock crashes are not the result of broken software but human errors like entering the wrong number of shares or some other typographical error, or incorrectly entering limit orders – these errors can be fixed by better risk management and oversight.
Sal Arnuk at Themis Trading said while crashes may be started by humans, the current market structure is set up to extract the most amount of pain from any mistake and more likely to snowball rapidly.
Credit Suisse on Jan. 17 found that few sudden swings are directly attributable to computer errors – between June 2010 through December 2012, 85 percent were caused by news, 9 percent by human error, and only 6 percent by a bad print – when a quote at an extreme price caused a halt, indicating a computer algorithm was responsible.
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