What a slide and recovery on Wall Street. At one point, the Dow fell nearly 700 points in 10 minutes. At the peak of the madness confusion reigned. 

Bloomberg notes that that 19 trades of 100 shares of Accenture were executed at 1 cent in seven seconds from 2:47 p.m. to 2:48 p.m. in New York, a minute after the Dow average plunged by the most since the market crash of 1987. Most of these trades were canceled. The stock recovered to about $41. Some early rumors focused on Citigroup (NYSE: C) and a possible fat-finger error, but the bank says it has uncovered no evidence that it was responsible for erroneous trades.   

The immediate reaction by some was to finger high frequency (high-frequency trading news)and other algorithmic traders. "The potential for giant high-speed computers to generate false trades and create market chaos reared its head again today," one senator said in a release. "The battle of the algorithms--not understood by nor even remotely transparent to the Securities and Exchange Commission--simply must be carefully reviewed and placed within a meaningful regulatory framework soon."

One columnist at TheStreet.com wrote: "Machines attacked the Dow and sank the stock markets today. There's no other explanation for what happened on the U.S. exchanges. Only machine trading could shave almost 1,000 points from the Dow Jones index in less time than the typical hard-working American takes for lunch."  

We'd all be wise to wait for more information. But the incident certainly can be spun many ways. On one hand, the speed with which the market fell in reaction to the erroneous trades was stunning and ought to concern us all. On the other hand, the trades were discovered and the system recovered. It must be acknowledged by all that warnings of such events, often in the context of sponsored access and high frequency trading, have been sounded.

Incidentally, a 20 percent drop would be required to activate circuit breakers that would shut down trading.

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