On Tuesday, April 23, a tweet from Associated Press (AP) revealed startling news. There had been explosions in the White House and Obama had been injured. The tweet was a hoax — the AP Twitter account had been hacked via a clever phishing exploit — but it briefly caused havoc. The Dow Jones Industrial Average dropped 144 points between 10.07 a.m. and 10.09 a.m., for example. Crude oil prices also briefly tumbled and the price of U.S. Treasury bonds and gold futures spiked. Within minutes, AP disclosed that the tweet was erroneous and things returned to normal, with the Dow eventually rising 152 points for the day to close at 14,719.
Crisis over, then? Er, not quite. The story of the hoax AP tweet resurrects troubling thoughts about systems and fragility. The first and obvious one is how it confirms the craziness of having computerized share-trading systems with hair-trigger settings. The frantic unloading of stocks that went on in the seven minutes before the hoax was uncovered was not done by human beings but by software programmed not only to read standard professional news feeds, but also to monitor the Twitter fire hose. Although software is good at lots of things, exercising judgment and common sense isn't one of them.
Nobody knows for sure who was behind the hacking of the AP Twitter account, though the so-called Syrian Electronic Army claimed the credit. But the thought immediately arises that somebody could make a lot of money from a stunt like this — which is why we will see more of it in the future. As a commentator on the business news site Quartz put it, "Seven minutes is an eternity in the world of high-frequency trading, where equities are exchanged in fractions of a second. Trading bots could certainly have bought index funds at the bottom of the plunge, quickly profiting as the rest of the market realized that the AP tweet was wrong."