Mark Palmer is the CEO of StreamBase Systems, a technology provider of real-time analytics technology.
Mark Cuban has provocative views on everything from the NBA draft to the Iraq war, so his latest shot at the financial trading industry comes as no surprise; the problem is, he lashed out at the Wall Street mavericks whose high tech trading systems worked perfectly, and probably saved him a lot of money.
In case you missed it, the Twitter account for the Associated Press was hacked, a hoax tweet was sent out that Barack Obama was injured in a bomb explosion. The Dow Jones fell 145 points in about 120 seconds and then recovered 134 points in the ensuing 3 minutes. So, in just 300 seconds, the DJIA traveled 279 points.
Cuban told CNBC that "all of this algorithmically driven trading has created a ton of downstream problems," and proposed some "solutions" to the "problems" that include taxing trades that are held for less than one hour.
But here's where Cuban has the whole thing backwards: the technology he wants to shackle saved him, and the man on the street, millions.
On the day of the Hack, I was speaking about high frequency trading at a Bloomberg conference with 200 people in the audience. I asked the audience to raise their hands if they personally lost any money that day. Not one hand went up.
This wasn't a Hack Crash; it was a "Twitter Twitch." In fact, high frequency trading was exactly the antidote that saved all "regular" investors (even Mr. Cuban) money.
It's true that Wall Street uses computers to make millions of trading decisions a second, and it's probably true that computers that detected the hacked tweet twitched in seconds.
But those same algorithms that watch millions of data points a second could tell, in real-time, that something was amiss. The Tweet was algorithmically refuted - Obama was fine and healthy - the descent stopped immediately, and the markets returned to being healthy in just a few seconds.
Without real-time technology, the market would not have corrected so quickly; the hack created a twitch, not a crash, and the only ones in the market who lost money were probably the dumbest of algorithms that chased the lie. Most algorithmic trading insiders know that in the most volatile times, it's the human trader who tends to win; algorithms tend to get whip-lashed chasing purely statistical trends that they don't understand.
Nobody, even a billionaire, can wish away the fact that the world is electronically fueled, and that social interaction, hoaxes, and trading are all done in real-time. To limit the use of real-time technologies on Wall Street would deny the markets the very tools it needs to make the market safer for everyone, and will continue to turn the next potential crash into a twitch.