The tweet was fake — the product of a hack — but given the events in Boston last week, the news spread like wildfire , garnering more that 4, retweets. The AP quickly addressed the situation , suspending its Twitter account, and alerting readers through associated accounts that the tweet describing an explosion at the White House was the result of a hack.

No harm, no foul, right? How do these computer programs do this?

Obviously, not every instance of a negative word in a story is going to mean that a specific company, or the broader market, is going to lose value, but these programs are able to filter through so much information that in the aggregate, these methods are often money-makers for HFT firms. Are Average Investors Getting Bilked by Wall Street Supercomputers?

For others however, the event proves that high-frequency traders are nothing more than a fair-weather friend. There is probably some truth to this argument, as trading costs have never been lower.

AP Twitter hack causes panic on Wall Street and sends Dow plunging | Business | The Guardian

At the same time, Tuesday shows that when the going gets tough, these computers tend to sell quickly and run for the hills, actually reducing liquidity when the market needs it most. Federal regulators are in the process of developing new rules to reign in volatility caused by trading algorithms, and that will be an ongoing process that will probably take years.

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