Finance news

Computers, unable to see the mold on an outdated UAL Corp (UAUA.O: Quote, Profile, Research, Stock Buzz) article, sparked confusion, a mass sell-off, and an emergency trading halt earlier this week that highlights the pitfalls of increasingly automated financial markets.

Shares in the parent of United Airlines plunged about 76 percent after a nearly 6-year-old news story on its 2002 bankruptcy filing appeared online on Monday.

UAL, which is no longer in bankruptcy, scrambled for a retraction and its stock later bounced back — but for some investors, especially frequent traders, the damage was done.

The use of algorithms — which allow computers to make decisions in fractions of a second — appears to be a main culprit in the UAL case.

Experts said the automated programs were applied to both the reading of the outdated news story and the trading of shares based on that information.

“You’re taking human judgment out of the news processing payday loans. Ninety-nine times out of 100 you get good results, but this is a pretty glaring exception.” said Jamie Selway, managing director of institutional broker White Cap Trading.

“Savvier people will benefit, and the art is knowing when someone is trading on bad information,” said Selway, who focuses on market structure.

So-called algos are now used to scour the Internet, combing through news for market-moving information. 

Read more