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.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV