Amy Chozick and Nicole Perlroth of the New York Times write Monday about how social media is affecting the stock market in the wake of the fake tweet last week from the Associated Press.

Chozick and Perlroth write, “The decision to allow market information on social media came after Reed Hastings, chief executive of Netflix, had posted on Facebook that the service had exceeded one billion hours of streamed video a month, sending its stock price up.

“‘We appreciate the value and prevalence of social media channels in contemporary market communications, and the commission supports companies seeking new ways to communicate,’ the S.E.C. said on April 2.

“Two days later, Bloomberg introduced a feature on its financial data terminals that incorporates a stream of relevant Twitter posts delivered to investors. All of Bloomberg’s more than 310,000 subscribers, who pay at least $20,000 a year for access to the terminals, now have access to those posts, which the company says are clearly identified as Twitter messages.

“‘The S.E.C.’s decision reflects the reality that we were dealing with in that this information is being distributed by companies and investors are consuming it and we needed to get it on the terminal,’ said Brian Rooney, the company’s core product manager for news, adding, ‘We’re not in a world where people live in a vacuum.’

“At the same time, the use of algorithms designed to peruse millions of sources of information like blogs and social media to analyze and execute trades is only becoming more widespread.”

Read more here.

Trading on the Chicago Board Options Exchange was delayed for more than three hours Thursday due to a software glitch, once again highlighted the fragile nature of making money trading.

Here are some of the details from Bloomberg:

The Chicago Board Options Exchange opened for trading three-and-a-half hours late today after a problem with its computer systems shut the derivatives market as its top executives gathered for an industry event in Las Vegas.

CBOE Holdings Inc (CBOE).’s exchange, which accounts for about 25 percent of options trading, said the technical problems were not the result of a computer hacker, spokeswoman Gail Osten said. Ed Provost, chief business development officer, said at the conference that a “software glitch” caused the outage. Trading in Standard & Poor’s 500 Index products started at 12:50 p.m. New York time and the rest of the exchange opened at 1 p.m. rather than the usual 9:30 a.m., CBOE said.

CBOE is the exclusive venue for options based on the Standard & Poor’s 500 Index and the so-called VIX (VIX) gauge of volatility. The delay highlights the fragility of U.S. equity exchanges in a week when a false report of explosions at the White House briefly wiped out $136 billion from the S&P 500 in about two minutes.

“We are doing zero business,” Greg Richards, who trades VIX and S&P 500 options as an institutional broker at Chicago- based PTR Inc. on the CBOE floor, said in an interview during the shutdown. “It is not good for the CBOE in a competitive atmosphere.”

The Wall Street Journal offered this context and what the delay could mean for the CBOE and the industry:

The system outage at CBOE was the latest in a spate of technology outages that have raised questions about the stability of the complex computer networks that underpin business in U.S. financial markets. The issues also came as CBOE’s functions as a regulator have been the subject of an investigation by the Securities and Exchange Commission, which is scrutinizing whether regulatory officials at the exchange maintained a too-cozy relationship with some customers.

The delayed opening meant that two critical tools for hedging stock-market risk—options on the S&P 500 index and the CBOE Volatility Index, or VIX—were unavailable to banks, institutions and trading firms on Thursday morning. Both options are traded solely on the Chicago-based exchange.

Financial firms had to hunt for alternatives such as options on similar exchange-traded funds, though traders said these generally are imperfect substitutes.

“Not being able to trade the VIX and SPX is a big deal,” said Mark Sebastian, chief operating officer of Option Pit, which provides tools for stock-options traders.

In communications with traders, the exchange cited a “download problem,” according to one trader who had received the message. An SEC spokesman said regulators were “monitoring the situation.”

The trading outage affected both floor and electronic trading, prompting several traders to complain that during past electronic outages, CBOE’s physical trading floor had been able to carry on.

“Unfortunately, all the traders that are there to provide liquidity were here this morning, but because of the evolution of electronic trading, customers couldn’t trade in and out of their positions this morning on the CBOE, which is pretty sad,” said Gavin Farley, an options trader for CMZ Trading, who works in the S&P options pit.

CNN Money quoted one trader as saying it was actually not that big of a deal that the exchange experienced delays:

Just days ago, on April 16, the exchange broke its record for volume, with 1,399,863 contracts changing hands.

One options trader, the head of trading at a major investment bank, said it wasn’t that unusual to see a trading delay in one of the 11 exchanges on which options are traded.

He says these types of delays happen once a month.

It’s generally not too disruptive since banks can just reroute orders from one exchange to another.

I find that argument a bit hard to believe since it’s the only exchange that trades VIX. Also, anytime confidence in the system is rattled, it’s a blow to the whole industry. While the problem likely had little effect on individuals, banks are likely seeing yet another weakness in the system with certain options only traded on one exchange. It will be interesting to see if some of the other exchanges try to step in and grab more share after today’s glitch.

Just weeks after entering settlement talks, the bankruptcy trustee for MF Global sued former CEO Jon Corzine for actions leading to the collapse of the brokerage.

Here’s the story from the New York Times:

A bankruptcy trustee has sued Jon S. Corzine and other former MF Global executives, claiming they were “grossly negligent” in the lead-up to the brokerage firm’s collapse.

The action by the trustee, Louis J. Freeh, comes just weeks after he agreed to postpone the lawsuit and enter mediation with Mr. Corzine. Now, by filing litigation that appeared to catch the MF Global executives off-guard, Mr. Freeh may have jeopardized those talks.

A spokesman for Mr. Corzine, Steven Goldberg, disputed the accusations and questioned why Mr. Freeh was even bringing the case. “We question why the trustee chose to file this lawsuit, which is filled with seriously flawed allegations, while he is participating in court-ordered mediation of these very claims.”

Mr. Freeh, who represents hedge funds and other creditors of MF Global, said on Tuesday that “the mediation process is ongoing,” and that it was “in the best interests of the Chapter 11 estates to file the complaint.”

Details of the allegations seem to come from a previously released report by Freeh, according to the Wall Street Journal story:

In the lawsuit, Mr. Freeh highlighted the alleged “acts and omissions” of the executives that he says “culminated in the business collapse of the company and the bankruptcies of the debtors.”

When the men were running MF Global, Mr. Freeh said they “dramatically changed” the company’s business plan without addressing “systemic weaknesses.”

Mr. Corzine, the suit alleges, engaged in “risky trading strategies” that strained MF Global’s liquidity. Mr. Freeh says the firm’s “inadequate” controls and procedures failed to properly monitor those strategies.

The lawsuit seeks to hold Mr. Abelow and Mr. Steenkamp, whom the suit calls Mr. Corzine’s “hand-picked deputies,” responsible for those controls and procedures.

“Between defendant Corzine’s arrival at the company and the commencement of the bankruptcies of the debtors, MF Global lost well in excess of a billion dollars in value, not including any shortfalls in customer funds,” the lawsuit alleges.

The lawsuit seeks damages from the men in an amount to be determined at trial. Any recoveries would go to the holding company’s creditors, not customers of its brokerage. MF Global has about $200 million in insurance coverage available to pay legal judgments.

The complaint appears to be drawn from a report into the origins of MF Global’s bankruptcy that Mr. Freeh released earlier this month. The document attributed much of the blame for the brokerage’s failure to Mr. Corzine.

Marketwatch.com had a thoughtful analysis of what the charges could mean to other Wall Street executives. Given the high profile nature of the CEO and the charges, I’m sure this will be closely watched in C-suites across the country. Here’s an excerpt:

The main issue, and the one that will be of the greatest import to Wall Street, is where risk-taking ends and negligence begins. MF Global bet $6.3 billion on European sovereign debt in the midst of a worsening credit crisis. Those sour bets led to the firm’s implosion in October 2011.

Was it bone-headed? Yes. Was is negligence and/or malfeasance? That is less clear.

The case may ultimately hinge on what managers knew and when they knew it. In the court filing, Freeh suggests management knew of faulty controls as early as a year before the firm’s collapse.

The Freeh lawsuit isn’t the only criticism of Corzine’s role in reshaping and, perhaps, destabilizing MF Global. Should it succeed, however, it would represent a seismic legal shift.

Wall Street CEOs just don’t get pinned for the fortunes of their firms and the fates of customers. They may lose a job, some reputation and suffer embarrassment, but they are not, in general, held responsible in a legal sense.

I’m sure there are more than a few CEOs watching the case who are nervous that Corzine entered talks only to have charges filed a few weeks later. The case could set precedence for other bankruptcies and holding executives responsible for actions. At the least, it’s a public setback for a well-known CEO.