Legal Commentary

The WSJ has a fascinating follow-up to the story about the United Airlines phantom bankruptcy (discussed here).  It seems that the 2002 Sun-Sentinel story that resurfaced might not have fooled humans, but rather automated search robots that troll for stock information.  As the WSJ reported:

The damage was exacerbated by the growing use on Wall Street of automated programs that trigger stock trades without any human interaction. The so-called algorithmic trading mechanisms, which buy and sell stocks based on news headlines and earnings data, were responsible for roughly a quarter of New York Stock Exchange trades in the last week of August.

From a legal perspective, this raises all sorts of questions about causation.  The Sun-Sentinel story could be characterized as misleading, since it did not have a date on it and arguably implied the bankruptcy discussions were taking place now.  Is it a misrepresentation if the story was literally untrue, but any human would have picked up on the error?  More important, perhaps, are the ramifications for market theory.  If 25% of NYSE trades are triggered by the findings of computer programs, are the markets becoming more efficient or less?

HT: Sam Blumoff