It was 10:30 pm in Bangalore. I distinctly remember the rumble of the thunder and the silver spark amidst the orange sky.
I decided to hit the bed early, for the fear of thunder raising its decibels and the love of silver in the sky. The rain in the air was moistening the eyes and making it heavy and droopy. I decided to go on twitter one last time for the daily dose of news. Then at 10:38 pm I read a tweet from the Associated Press about bomb blasts at White House and that Barack Obama is injured. This particular tweet pumped unquantifiable adrenaline in my blood stream. I raced to the television only to see the towering sixes of Chris Gayle, repeatedly; a bombing outside the French embassy in Tripoli and an interview of a gay activist who was speaking in a heavy French accented English on his triumph in Paris. There was zilch news on the ‘purported’ blasts at 1600 Pennsylvania Avenue.
Then I realized that the Associated twitter handle has been hacked by the pro-Assad Syrian ‘electronic’ army. Then amidst all the rain and thunder I started reading investigating more only to realize that the High Frequency Trading (HFT) algorithm had picked up the tweet and started a mass exodus from the various bourses. Dow Jones Industrial Average plummeted 1%. In just two minutes it fell from 14700 points to 14554, a drop of 146 points.
This ‘short-lived hoax on twitter briefly erased $200 billion of value from US stock markets. This hoax opened a Pandora box of vulnerabilities of financial markets apropos Twitter. We should also view it the other way, the vulnerabilities of computerized trading programs that buy and sell shares without human interventions apropos social media.
The two-minute selling spree left many traders stunned and dismayed, even though the market quickly recovered the losses afterward.
“It’s frustrating and scary that a tweet can erase hundreds of billions from the market in a short time, but that’s the world we live in,” said R.J. Grant, associate director of equity trading at Keefe, Bruyette & Woods.
Securities and Exchange Commission (SEC) officials, I have read, are looking into trading activity that took place in response to the AP tweet, according to a spokesman, who said the agency routinely looks into irregular market action. Regulators looking into the activity said it was too early to tell if the tweet was intended to disrupt the market. Jenny Shearer, an FBI spokeswoman in Washington, said the bureau is also investigating the incident.
This thunderous night was proving to be, at least for those two minutes, a-la the famous ‘flash crash’ of 6th May 2010 when the Dow plummeted 1000 points.
The Syrian Electronic Army, which describes itself as “a group of enthusiastic Syrian youths”, a group devoted to President Bashar-al-Assad, the anti anti-incumbency group. Was this hack an upshot of just a youthful escapade? Or was it part of a much bigger conspiracy by the Assad lenient groups to bring in cash to repay for the Kalashnikovs and Molotov Cocktails? Was Assad rejoicing in the Russian submarine? Should the SEC be more careful with the social media guidelines that it outlined a month back, should it add that…. that…. that je ne sais quoi.
Meanwhile the rain has stopped. The thunder is at a distant. Rumbling, waiting to strike again.