April 29, 2013
When the Associated Press’ Twitter account was hacked last week, false tweets that the White House had been attacked led to a tumble in the markets. Examining the fallout, Amy Chozick and Nicole Perlroth of the New York Times report financial institutions are taking a good look at the effect social media can have on the stock market:
On Tuesday, the Commodity Futures Trading Commission plans to hold a public meeting in Washington with a couple of dozen high-frequency traders to discuss whether there should be additional safeguards to protect against the effects of social media on markets.
Even as markets rebounded on Tuesday, some investors lost money on the quick decline while others made money if they bet on a sharp drop.
“In 2010, we passed Dodd-Frank, the big financial reform bill, but nowhere in there do they mention high-speed trading or technology,” said Bart Chilton, a member of the trading commission. “That’s how quickly markets are morphing. Now, here we are three years later, woefully unprepared.”