Safeguards Discussed For Preventing Social Media Distortion Of Markets

A recent false report about explosions at the White House, posted on social media and picked up by news web sites, caused an immediate drop in the Dow Jones Industrial Average. So now, additional safeguards are being discussed.

The markets recovered in minutes, but not before $136 million in market value vanished before traders realized it was a hoax.

Internet law specialist Travis Crabtree is with Texas-based Looper, Reed and McGraw.

"When there is a false report put out there and you've got these computers who are just combing social media and looking for key trigger words like 'merger' or 'sale' or in this case "White House bomb and explosion,' that make trades automatically without a human filter to realize whether or not these posts on Twitter or other social media are true."

The false report was posted after Syrian hackers broke into the AP's Twitter feed

"And you know, it's reasonable for people to believe the AP is reporting the truth, and so when the AP reports it and it gets tweeted thousands of times, it's perfectly reasonable for folks like you and me to think that's true and maybe react to it."

The Commodity Futures Trading Commission is now looking at ways to implement better human judgment and intervention as safeguards in high-frequency trading. Crabtree says having top-notch security on a company's social media site is a must.

 

This tweet was issued at 12:25 p.m. on the 23rd of April:

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Ed Mayberry

Local Anchor, All Things Considered

Ed Mayberry has worked in radio since 1971, with many of those years spent on the rock 'n' roll disc jockey side of the business...