Diggin' technology every day

August 2, 2012

Losing $400M in a matter of minutes due to a software bug

Filed under: News — Tags: , — Nate @ 9:52 am

This is pretty crazy, yesterday morning a Wall St market maker had some bug(s) in their software platform that caused them to perform a ton of trades, as one reporter put it around 300% of normal volume on the NYSE was being traded by this one company. As the story unfolded the company continue to say everything is normal, then they changed their story to we’re investigating, then they changed their story to a technology error occurred.

[..] Among other stocks, Protective Life (PL.N) had already traded more than 10 times its usual volume, and Juniper Networks JPNR.N has already seen six times its usual daily volume.

I bet they hoped the NYSE was going to reverse those trades that were triggered by whatever bug it is – but at the end of the day yesterday the NYSE opted not to reverse the vast majority of them.

The result is the company – Knight Capital lost more than $400 million as a result of the trades and is now seeking alternative means to re-capitalize itself. Knight’s stock has lost $600M in market cap (~67%) since the event. They had a billion dollar market cap as recently as 36 hours ago.

Yesterday the traders at Knight were obviously under a lot of stress and they took great comfort in this video CNBC showed on air. It is quite a funny video, the folks at Knight kept asking to see it again and again.

I’m not sure if I’ve mentioned this here before but this is a good of spot as any, a video from a couple months ago about how serious high frequency trading is – and the difference 11 milliseconds can make.


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