[T.S.R:15813] How a Trading Algorithm Went Awry

http://online.wsj.com/article/SB10001424052748704029304575526390131916792.html?mod=googlenews_wsj

.............Also not unusual was that Waddell placed the trade using a computer program known as a trading "algorithm" designed to stand in for a human trader and parse out buying or selling based on different variables. Generally, traders opt for algorithms that consider trading volume, price changes and the amount of time to complete a trade.

But Waddell's desk opted for an algorithm designed to sell 75,000 E-mini contracts at a pace that would range up to 9% of trading volume—and not take into account other factors. The report details how a similar-size trade earlier in 2010 took five hours to execute, but in this case, the Waddell trade unloaded on the market in just 20 minutes..................

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