The term comes from the idea of a clumsy, ‘fat-fingered’ typist, who presses extra keys without being aware of it.

As the practice of high-frequency trading continues to become more widespread, concerns are growing that erroneous trades carried out by ‘algos gone wild’—a sort of digitally amplified version of the ‘fat finger’ phenomenon—could cause a market crash at Internet speed, a meltdown that no one could stop. Two recent market glitches could provide a preview of what’s to come.

On November 14, 2007 at 3:20pm one of Credit Suisse’s trading algorithms suddenly went haywire, and, in a few moments, sent hundreds of thousands of bogus requests to the exchange. This sudden surge of requests, which were cancellations for a large batch of orders that the machine had never actually sent out, acted like a denial-of-service attack on some parts of the New York Stock Exchange. The messages clogged the tubes and caused parts of the exchange to freeze up, affecting trading in 975 stocks.

After an extensive investigation, the NYSE assessed a $150,000 fine for Credit Suisse’s “failing to adequately supervise the development, deployment and operation of a proprietary algorithm, including a failure to implement procedures to monitor certain modifications made to the algorithm.”

The exchange’s filing, released a little over a week ago, has the details of precisely what drove the algorithm haywire—it was a trader who accidentally double-clicked an icon in a trading program’s interface, when he should’ve single-clicked. No, I am not making that up.

(View the rest of the article at How a stray mouse click choked the NYSE & cost a bank $150K)