Nanosecond Trading Could Make Markets Go Haywire

The stock market has always been fast-paced, but with the introduction of automated trading, the speed of routine transactions has increased far beyond human capacity to keep up, creating a host of new dangers. New “programs are designed to trade enormous volumes of stocks, bonds and other financial instruments at superfast speeds, taking advantage of second-to-second fractional price shifts and market trends,” reports Brandon Keim for Wired. “Flash crashes” – sharp, rapid dips and recoveries in the market happen everyday at alarming frequency, leading some experts to question whether automated trading is financially stable and whether a large-scale crash could occur as a result of constant stress on the market. Differences in cross-border trades and regulation are a particular concern. The algorithms operate in fractions of a second, so millions of trades can be made before any human could possibly respond. – YaleGlobal