UAL, moldy news and robots in charge

By: Ray Pellecchia

File Under: NYSE

• 3 Comments
• Email Entry

I don't mean to turn this space into your daily fix of news about Nasdaq's problem last Monday with old UAL news becoming new, market-moving news, but the Wall Street Journal did report today that the SEC would take a look at the situation.

And I couldn't resist just one more article, this one from Reuters, for three reasons.

Automated trading bites some UAL investors (Reuters.com, as picked up by The Guardian in the U.K.) -- Computers, unable to see the mold on an outdated UAL Corp article, sparked confusion, a mass sell-off, and an emergency trading halt earlier this week that highlights the pitfalls of increasingly automated financial markets.

The first reason is right there: "...see the mold on an outdated UAL Corp. article..." Mold -- that's just good writing.

The second reason is the quote from my occasional correspondent Jamie Selway:

"You're taking human judgment out of the news processing. Ninety-nine times out of 100 you get good results, but this is a pretty glaring exception." said Jamie Selway, managing director of institutional broker White Cap Trading."Savvier people will benefit, and the art is knowing when someone is trading on bad information," said Selway, who focuses on market structure.

Last but definitely not least is my personal favorite, the very last end of the article, which I wish were higher, but I'm not going to quibble because I think this is the first piece to note the difference in markets.

The example of UAL, which is traded on the Nasdaq Stock Market, once again highlights the difference between Nasdaq's all-electronic platform and the hybrid platform operated by NYSE Euronext.

On Nasdaq, erroneous trades are corrected afterward, while on the NYSE, specialists on the trading floor can halt abnormal stock drops as they happen.

The latter -- human oversight -- is disappearing from the landscape of financial markets, although it may have softened the blow for UAL on Monday.

A Nasdaq spokeswoman said the exchange operator halted trading in UAL stock after it was contacted by the company.

Emphasis mine. Have a good weekend, my friends.