Wednesday, September 10, 2008

Google Crawler + Human Error = United Airlines Stock Frenzy on Wall St.

Back in 1994, a computer "hiccup" disrupted Nasdaq trades for 2 1/2 hours and caused a slight panic amongst traders. Having interned on Wall St. back in the day for two summers (ForEx, Swiss Francs), I can unequivocally attest to the fact that computers are the heart and soul of Nasdaq and Wall St. by allowing buyers and sellers to post prices and execute trades; billions of dollars are exchanged daily and every second counts. That particular day of computer malfunctions reduced the day's brokerage commissions (and put-off buying that yacht by a week), but fortunately not much else.

Fast-forward 14 years - computers are still wreaking havoc on Wall St. This past Monday (Sept. 8th), an article popped-up on the web that declared that United Airlines had announced that it was filing for bankruptcy and, taken as gospel, sparked a mass frenzy of selling/dumping of UA stock on Wall Street. The problem is, the story was false.

Why or how did this happen? Simple answer: Google search. Google discovered a six-year-old story on the Web site of a South Florida newspaper that did not have a date on it.

When Google found the article via its crawler, it applied the date of the search on that story and posted it on Google news. A reporter for a securities investment firm saw it, took it as being a new story, "United Declares Bankruptcy," punched it into Bloomberg, and it hit Wall Street like a tsunami where within a matter of minutes, more than 15 million shares had traded and United Airlines had lost 75 percent of its value.

Fortunes have been made and lost from rumors on Wall St. for longer than I've been alive, so that in itself is nothing new. What IS new is that these rumors can now be ignited and posted by anyone with a working knowledge of search and/or SEO, and Wall St. Now granted, this had a lot to do with human error, so the fault lies not just on Google; but realist that I am, I have to wonder if this could possibly serve as a blueprint for some unscrupulous bloke who wants to manipulate the system and short a stock (betting that it will go down) by planting a fake story that would cause the stock to crash. And if you had shorted that stock, you could stand to make a lot of money.

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