Indian stock brokers react while watching Bombay Stock Exchange (BSE) index on their trading terminal in Mumbai, India, Monday, Sept. 17, 2012. India's central bank Monday cut the cash reserve ratio as it tries to kick-start flagging growth and welcomed government efforts to open Asia's third-largest economy to more foreign investment.Rajanish Kakade/The Associated Press
India's National Stock Exchange endured its very own flash crash Friday, prompting a sell-off that wiped out $60-billion (U.S.) in value and sending shares of companies such as State Bank of India plummeting in a matter of seconds.
Because the drop was so dramatic, trading on the exchange was quickly halted. But while most people assumed the crash was caused by computer algorithms or high frequency traders running wild, it was quickly determined that the crash was caused by human error.
It turns out that $126-million of orders were entered incorrectly by the Mumbai-based brokerage Emkay Global. However, it is likely that the broad market drop came so suddenly because computerized trading programs saw the downward pressure and acted quickly before anyone realized what happened. It was only after the market was halted that people realize what had happened. By the end of the day, the market was down only 0.8 per cent.
Glitches caused by automated trading programs are still fresh in many people's minds. Just this week, Kraft Foods jumped 29 per cent right after the market opened, only for investors to realize it was caused by computer error.
But the latest case is a reminder that humans can mess up too, yet again muddying the waters in the debate for and against computerized trading. Surely, it will rage on.
Tim Kiladze