Knight Blames Trading Fiasco On “Dormant Program” Glitch [Zerohedge]
August 15, 2012 Leave a comment
Remember – when in doubt, always blame it on the software: that way the risk of tainting one’s “business model” no matter how irrelevant and anachronistic it has become, may be preserved – after all it is the vacuum tube’s fault. If possible add the words “glitch”, “dormant” and “stupid algo” and always, always,use the passive voice: once again – it can never be insinuated that a carbon-based lifeform (human, monkey, Mary Schapiro) was behind the screw up. Sure enough, here comes Knight two weeks after nearly destroying its trading platform responsible for 10% of the daily market churn, and to a big extent for the endless levitation to VWAP on low volume we have seen every day for the past 3 years, and blaming it all on “dormant software” which was accidentally reactivated. From Bloomberg: “Knight Capital Group Inc. (KCG)’s $440 million trading loss stemmed from an old set of computer software that was inadvertently reactivated when a new program was installed, according to two people briefed on the matter. Once triggered on Aug. 1, the dormant system started multiplying stock trades by one thousand, according to the people, who spoke anonymously because the firm hasn’t commented publicly on what caused the error. Knight’s staff looked through eight sets of software before determining what happened, the people said.” Of course, one may ask just why did someone put in code in the first place, that multiplied stock trades by one thousand: is that the special turbo buy option reserved for when the Liberty 33 phone rings?