A number of U.S. stocks saw violent swings Wednesday, as trading firm Knight Capital Group acknowledged technical glitches in its market-making unit that affected the functionality of its automated trading systems.
In an echo of the 2010 Flash Crash, the technical issue impacted 150 New York Stock Exchange-listed stocks. Trading in five NYSE stocks – China Cord Blood, CoreLogic, Trimity Industries, Kronos Worldwide, and Molycorp – was halted because their prices moved more than 10% within a five-minute period.
While Wednesday’s events had few immediate consequences, it may give fresh impetus to regulatory efforts to monitor and regulate so-called high-frequency trading (HFT). Headed by Commissioner Scott O’Malia, the CFTC’s Technology Advisory Committee has recommended that the agency adopt a broad definition of HFT as a first step towards potentially requiring HFT firms to register as such, and allow their automated trading algorithms to be audited.