Algorithmic Trading Is a Huge, Ticking Litigation Bomb, FRT Tells Real Money

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FRT Admin
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February 16, 2016

algo tradingOf all the trading conducted on world stock exchanges, about half is carried out through algorithmic trading. Considering the sheer volume of algorithmic trading that occurs and its potential impact on market volatility, we are likely to see a new era for securities litigation. Despite the fact that algorithmic trading should help increase market efficiency, algorithms are prone to fraud and manipulation, Michael Lange, FRT’s Counsel for Securities Litigation, recently told Real Money.

“A number of academic studies are now questioning the increased efficiency, while volatility has raised dramatically and is punctuated by flash crises following the introduction of algorithms,” Lange added.

Lange points to a recent situation in which a fake press release went out supporting cosmetics company Avon, which sent shares soaring by 20% and increased the volume by 448%.  Once Avon released that the information in the press release was inaccurate, prices fell. This is a great example of why algorithmic trading can be subject to class actions because they cannot pick up on the element of human error. It will be interesting to see if securities class action suits due to algorithmic trading become prevalent in years to come.

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About FRT

U.S. CLAIMS  I  GLOBAL GROUP LITIGATION  I  ANTITRUST  I  LITIGATION MONITORING  I  BUYOUTS

Founded in 2008, Financial Recovery Technologies (FRT) is the leading technology-based services firm that helps the investment community identify eligibility, file claims and collect funds made available in securities and other class action settlements. Offering the most comprehensive range of claim filing and monitoring services available, we provide best-in-class eligibility analysis, disbursement auditing and client reporting, and deliver the highest level of accuracy, accountability and transparency available. For more information, go to www.frtservices.com.

This communication and the content found by following any link herein are being provided to you by Financial Recovery Technologies (FRT) for informational purposes only and do not constitute advice. All material presented herein is believed to be reliable but FRT makes no representation or warranty with respect to this communication or such content and expressly disclaims any implied warranty under law. Opinions expressed in this communication may change without prior notice. Firms should always seek legal and financial advice specific to their unique situation and objectives.

ABOUT FINANCIAL RECOVERY TECHNOLOGIES
SETTLED  I  NON-US GLOBAL OPT-IN  I  ANTITRUST  I  GLOBAL PASSIVE  I  DIRECT OPT-OUT  I  BUYOUTS

Founded in 2008, Financial Recovery Technologies (FRT) is a leading technology-based services firm that helps the investment community identify eligibility, file claims and collect funds made available in securities and other class action settlements. Offering the most comprehensive range of claim filing and monitoring services available, we provide best-in-class eligibility analysis, disbursement auditing and client reporting, and deliver the highest level of accuracy, accountability and transparency available. For more information, go to www.frtservices.com.

 

This communication and the content found by following any link herein are being provided to you by Financial Recovery Technologies (FRT) for informational purposes only and does not constitute advice. All material presented herein is believed to be reliable but FRT makes no representation or warranty with respect to this communication or such content and expressly disclaims any implied warranty under law. Opinions expressed in this communication may change without prior notice. Firms should always seek legal and financial advice specific to their unique situation and objectives.