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Much of Market's Selloff Is Electronic: Analyst

Thursday, 18 Aug 2011 | 5:19 PM ET

The markets are plunging, and computers are to blame for much of Thursday's selling, says Peter Costa, president of Empire Executions.

"A lot of the selling that we're seeing is program related," Costa said in an interview with CNBC. "There might be some institutional impetus behind it, but alot of it is an electronic selloff. There's nobody at the other end of that, as far as I'm concerned."

Although the Dow Jones Industrial Average ended the day down more than 419 points after shedding almost 530 points during its session low, Costa said he sees today's market as a simple selloff rather than capitulation .

Cause of Today's Sell-Off
Discussing today's market drop and how traders are playing it, with Peter Costa, Empire Executions; Alan Valdes, DME Securities, and CNBC's Amanda Drury.

The Dow's drop, which follows the largest one-day decline of European sharessince March 2009, is a reaction to disappointing economic data and continuing worries about the stability of euro-zone banks.

Thursday's volatility index (VIX) increased almost35 percent to trade above 42.

Alan Valdes, the vice president of trading at DME Securities, also discussed the impact of Europe's ban on short-selling financials.

"It just goes to show you, you really can't manipulate the market. That's basically what you're doing when you get rid of the short-sell rule," Valdes said. "Actually you need the short-sell rule, because eventually those short sellers become buyers—so without them, there's a potential of the market drifting even lower."

WATCH: The Impact of Today's Selloff on Tech Stocks

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Disclosures:

Disclosure information was not available for Peter Costa, Alan Valdes or their companies.

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