Another Market Error Sparks Concern
Kraft Foods Group (NASDAQ:KRFT) had a wonky morning on October 3. Shares shot up as much as 29 percent in the first minute of trading and 168 trades at or above $47.82 were ultimately canceled. The erroneous trades are thought to be the result of a technical error and the event has rekindled concern about electronic trading tactics on Wall Street.
Facebook’s (NASDAQ:FB) IPO was famously botched and the Nasdaq OMX (NASDAQ:NDAQ) has been sued for negligence by at least one investor. Knight Capital (NYSE:KCG) lost $440 million in 45 minutes because of an out of control program and was only saved by a group of investors at the last minute. The complicated world of high-frequency trading has been attacked in the United States Congress as dangerous and unfair. According to The Economic Times, between 50 and 70 percent of the trade volume on any given day is due to high-frequency trading.
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David Lauer, a consultant at Better Markets, said that “‘mini flash crashes’ occur on a near-daily basis in individualized stocks,” and adds that the way the markets are set up now “has produced a market that values speed over fair access.”
Scott Nations, chief investment officer and president of NationShares, told CNBC that “We saw a whole generation of people that didn’t trust the stock market after the 1930′s and 40′s, and I think we’re setting up for a generation of people who don’t trust the market right now.”
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