By Igor Zhitnitsky and Victor German
NEW YORK (TheStreet) -- The flash crash of 2010, which sent the Dow Jones Industrial Average briefly plunging nearly 1,000 points, brought to public attention the growing influence that algorithmic trading can wield over the market.
In the years following, mini flash crashes of individual stocks became commonplace, even if not always as loud. Beside the occasional flash crash, high-frequency trading, or HFT, is believed to have had a hand in other harrowing market events in recent years. The technical difficulties at Nasdaq on the debut of the Facebook (FB) initial public offering, for example, was believed by many to have been at least in part the result of aggressive high-frequency trading. That event caused shares of Apple (AAPL), Netflix (NFLX) and at least two dozen other stocks to behave erratically for half an hour, culminating in a 17-second shutdown of the entire exchange.
Even the very firms whose sole business is related to trading are not immune to the unpredictability of these algorithms. In March 2012 we saw the BATS Global Markets (BATS) IPO crash 99.8% in less than 10 seconds, temporarily taking Apple down 9% as collateral damage. Later that year, Knight Capital Group (KCG) lost $440 million -- four times its net income for the previous year -- in half an hour to a poorly tested trading algorithm.
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