Algo Traders Mistakenly Bid Up Shares of Wrong Company

Algorithm trading error - Illustration.Algorithmic traders have caused havoc in the markets over the past decade or so and have been widely blamed for a couple of "flash crashes" that have taken place.

These algo traders come in all shapes and sizes. There are programs operating right now that will automatically scan news releases and trade based on what the releases contain. This can be extremely effective in some cases, while in others it can produce some hilarious results.

Take the case of Auris Medical Holding AG, which is a penny stock that is currently trading for 40 cents per share.

Earlier this week, Johnson and Johnson announced that they would be purchasing robotic-surgery firm Auris Health Inc. for approximately $3.4 billion in cash.

Well, the algo traders got confused and thought that Auris Medical Holding AG, and not Auris Health Inc., was being bought for $3.4 billion in cash.

So, some mainframe computer locked in some bunker somewhere started bidding up shares of Auris Medical Holding AG, despite the fact that Johnson and Johnson was buying a completely different company.


This wasn't the first time that algo traders got confused by this deal.

On January 23rd, Bloomberg reported that Johnson and Johnson was contemplating buying Auris Health Inc., and shares of Auris Medical surged that day as well.

After the deal was officially confirmed earlier this week, the algorithmic traders got confused for a SECOND time. You would have thought that the programmers would have prevented such a thing from happening for a second time.


Algo traders have added a great deal of volatility to the markets over the past decade or so as they have grown in prominence, and this is just another example of the havoc that they can create.

Source: - Case of Mistaken Identity Sends Auris Medical Shares Soaring 30%

Filed under: General Knowledge

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