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Alternative Market Briefing

Comment: Last week’s fake AP tweet should not hurt high frequency trading’s reputation

Friday, May 03, 2013

Arjen Gaasbeek
Benedicte Gravrand, Opalesque Geneva:

On Tuesday, April 23rd 2013, a mini sell-off occurred following a fake tweet coming from the Associated Press (AP)’s feed, that announced explosions at the White House. Stocks slumped but recovered within minutes after traders realised it was a hoax. The rapid drop in the stock market was mainly caused by automatic computer systems doing high frequency trading (HFT), according to many commentators.

During next day’s "Battle of Quants" conference in New York, Zeid Barakat, co-founder of Flyberry Capital, a strategic trading firm that uses high-speed trading strategies to trade commodity futures around news events, said he had not traded on the "anomalous" tweet "because he didn’t have the depth of data to feel comfortable modeling a trade," The WSJ reported. And since the Securities and Exchange Commission (SEC) recently allowed corporations to disclose earnings news through social media outlets, Mr. Barakat added he may in future integrate certain Twitter feeds into his firm’s models.

"False news has been around as long as news and inevitably impacts markets," Doug Bry recently told Opalesque by e-mail. "Even before HFT, false news could cause price spikes as people reacted and stops were hit. It's possible the impact is a bit diffe......................

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