Any trader watching the stock market today just about needed a shock to the heart as the DJIA – Dow Jones Industrial Average – plummeted almost 1,000 points because of a trading error. The stock market today felt the dive of the DJIA, starting with a huge Proctor and Gamble sell-off. With a “trading error” this huge, is the Citigroup employee going to start looking for new jobs or internet loans?
The DJIA and NYSE drops raise trading error questions
In just a couple of short hours today, because of a trading error, the Dow Jones Industrial Average and New York Stock Exchange both lost almost 1,000 points – nearly 10 percent of their value. A plunge between 2 and 3 p.m. raised questions of financial downfall in an already-shaky market. The drop was triggered by a sale of Proctor & Gamble stock futures. What the heck happened?
DJIA tumble blamed on trading error
Some news companies are blaming the stock market today on a single wrong letter. A Citigroup employee erroneously entered a “b” rather than an “m” in a trading program – selling off billions (instead of millions) of Proctor & Gamble stock futures. It only took 120 seconds for billions of stock futures to sell off.
Citigroup says trading error not its fault
Citigroup, which is launching an investigation into the DJIA trading error, has said “At this point we have no evidence that Citigroup was involved in any erroneous transaction”. As a result of the Citigroup trading error or not, Proctor and Gamble was certainly the center of the DJIA drop.
Electronic trading made trading error worse
The trading error, in and of itself, was bad enough to send the DJIA into a tailspin. Automated training made the NYSE and Nasdaq join in the tumble. While there is still plenty of stock trading that happens on the floor of the New York Stock Exchange, most trades are electronic, and the majority are automated. When the price of Proctor and Gamble stocks started to nosedive, automated trading programs jumped on the bandwagon. Programmed to sell when a stock hits a particular price, these programs began selling off hundreds of millions of shares.
Trading error heightens fear of DIJA fall
Fears of one more financial crisis began with the tumbling of the stock. Investors are incredibly nervous because of both a falling Euro and riots in Greece. In the end, the trading error may are a human error – but it is one that does not do much to restore confidence within the financial industry.
Sources
CNBC
http://www.cnbc.com/id/36999483
The Street
http://www.thestreet.com/story/10749060/1/stock-market-crash-or-trading-error.html?cm_ven=GOOGLEN
