Originally posted by MyUserName
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"today may be the single worst day in Knight's market making history"
May? What the hell happens at that place?!Leave a comment:
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Knight Raiders
Hate quoting the Register but anyway:
"Knight Capital, a firm that specialises in executing trades for retail brokers, took $440m in cash losses Wednesday due to a faulty test of new trading software. This morning an El Reg reporter called it a trading “glitch", which isn’t nearly as accurate as the term I’d use: “f**king disaster.”
Knight Capital’s software went out and bought at the "market", meaning it paid bid price and then sold at the ask price – instantly. Over and over and over again. One of the stocks the program was trading, electric utility Exelon, had a bid/ask spread of 15 cents. Knight Capital was trading blocks of Exelon common stock at a rate as high as 40 trades per second – and taking a 15 cent per share loss on each round-trip transaction. As one observer put it: "Do that 40 times a second, 2,400 times a minute, and you now have a system that’s very efficient at burning money".
They may get at least a partial reprieve. The NYSE will reverse trades in six stocks during the time period when the prices were at least 30 per cent outside the normal trading range for the stocks."
How one bad algorithm cost traders $440m ? The Register
I am suprised NYSE is reversing the trades, WTF? Deal is a deal!
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