{"id":261942,"date":"2010-02-01T11:29:54","date_gmt":"2010-02-01T16:29:54","guid":{"rendered":"http:\/\/www.businessinsider.com\/how-the-rambus-fat-finger-incident-was-really-an-algorithm-gone-wild-2010-2"},"modified":"2010-02-01T11:29:54","modified_gmt":"2010-02-01T16:29:54","slug":"how-the-rambus-fat-finger-incident-was-really-an-algorithm-gone-wild-rmbs","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/261942","title":{"rendered":"How The Rambus “Fat Finger” Incident Was Really An Algorithm Gone Wild (RMBS)"},"content":{"rendered":"

\"HFT<\/p>\n

Earlier today we had the chance to speak with Ben Bittrolff of Cyborg Trading<\/a> and had the opportunity to discuss the world of high-frequency algorithmic trading at length.<\/p>\n

Eventually we came across the topic of the Rambus (RMBS) “fat finger” incident in which RMBS stock fell<\/a> nearly 35% in a matter of minutes, only to later rebound.<\/p>\n

Traders called the incident a “fat finger” or human error. According to Ben, such is not the case.<\/p>\n

As Ben argues, human interaction is largely gone from major trades involving large blocks of stock. An algorithm<\/a> will not allow a huge order to go out all at once. If anything, it’ll slowly begin to breakup the block into smaller orders, whether you like it or not. The algorithms have fail-safes of sorts built into them, so when a large caliber order comes through, it’s immediately checked and processed into smaller orders.<\/p>\n

A better theory for Rambus is that incorrect data was fed to an algo, setting off a chain reaction across the market. All an algo needs to go haywire is a false tip or data point and everything goes off. After all, it’s just a computer model and can’t play a market like the human mind can.<\/p>\n

\"RMBS<\/p>\n

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