@falsenews @whinytraders: 140 characters moved the market. Big deal
Mid-day on April 23rd, a tweet appeared from the respected Associated Press (AP) stating that there were two explosions at the White House and President Obama was injured. The markets dropped by 143 points in just a few minutes. Of course, we know now that the AP tweet was false, the perpetrator had hacked the @AP Twitter account. The market quickly recovered and ended in positive territory for the day, Hurray!
While the immediate impact of the tweet on the market has long dissipated, the event is having a more lasting impact on the continued discussion on the design of our markets. TABB Group took a survey of 234 market participants to see how this event has shaped their confidence in market structure, who they think was most affected and what the next steps will be.
The responses show that market structure confidence has been declining since the Flash Crash. Part of the more recent decline could be from the Hash Crash, although a majority of respondents reported that it in fact had no impact on their level of confidence. Respondents also believe that US equity markets were negatively affected the most. Despite these results, TABB believes the equity market structure isn’t to blame, but rather the market responded as it should to alarming news, especially given the current climate of greater fear and uncertainty after the recent terrorist attacks.
The SEC will probably take several months to issue its report on the incident as there is still no effective audit trail system in place; however, Syrian Electronic Army has already claimed responsibility. The motive behind the tweet, though, is still being debated. Some believe it was intended to disrupt the markets while others think it was simply a radical news posting and the market crash was an unplanned consequence. Regardless of the intent, it’s still alarming to think that just 140 characters can make the market drop by the same amount of points.