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Losing $10 Million Dollars A Minute
August 2, 2012 9:15 AM   Subscribe


 
That's okay, the American people will make good on all their losses.
posted by Roentgen at 9:16 AM on August 2, 2012 [15 favorites]


It is apparently beyond my capabilities as an otherwise normal human being to have even a shred of sympathy for any of those people.

My bad.
posted by Danf at 9:17 AM on August 2, 2012 [61 favorites]


Are they too big to fail? I've never heard of them, so I'm guessing not.
posted by LordSludge at 9:18 AM on August 2, 2012


Office security bust down the IT door -- on the seat, only a trollface printout...
posted by Drexen at 9:18 AM on August 2, 2012 [33 favorites]


*sigh* mods: would you mind fixing the two typos above? sorry!
posted by Dean358 at 9:18 AM on August 2, 2012


> the American people will make good on all their losses.

Nah, not "too big to fail" - and near as I can tell they aren't actually "insolvent" as in having a net negative value, they have simply destroyed enough of their equity that they are (possibly) below capital requirements (in other words, if this is the case then they no longer have enough chips to stay at the table).
posted by lupus_yonderboy at 9:19 AM on August 2, 2012


Maybe... buying and selling millions of shares a minute is a bad idea?
posted by Artw at 9:20 AM on August 2, 2012 [53 favorites]


Knight Capital? Loses lots of money all of a sudden? Let me guess, a stolen thumb-print was involved?

Puh-leeze, this is just a huge marketing gimmick for the Dark Knight Rises.

AT A THEATER NEAR YOU
posted by resurrexit at 9:21 AM on August 2, 2012 [7 favorites]


Yes, I am job sucks!
posted by sibboleth at 9:21 AM on August 2, 2012 [14 favorites]


Bah, the head of their IT department is a hero for managing to stop was was clearly an emergent AI that was trying to crash the world economic system. We'll do that on our own, thanks very much!
posted by Wretch729 at 9:22 AM on August 2, 2012 [5 favorites]


I have been waiting for something like this to happen ever since High Speed Trading (HST) became prevalent enough to have a noticeable effect on the market. How do you test software that you're trusting to act with hundreds of millions of dollars of capital at speeds no human can follow? How do you test all of the possible inputs when those are market conditions and actions of other investors that aren't under your control? How do you catch it if something goes ... oops.
posted by localroger at 9:22 AM on August 2, 2012 [7 favorites]


Is this going to impact their talking-car crime-fighting activities?
posted by hattifattener at 9:23 AM on August 2, 2012 [16 favorites]


Maybe... buying and selling millions of shares a minute is a bad idea?

Oh come on, who else is going to extract and hoard all of the wealth out of our contemporary economic system?
posted by Theta States at 9:23 AM on August 2, 2012 [2 favorites]


Did they try turning it off and on again?
posted by Cash4Lead at 9:23 AM on August 2, 2012 [87 favorites]


So is this the sort of firm that ordinary civilians actually invest their savings in, or is the capital all actually owned by the firm and they just sort of churn it through the stock market according to some ouroboros-esque voodoo incantation algorithm that somehow makes them get richer and richer?

I guess what I'm asking is were normal people harmed through this glitch or is this just the destruction of some "financial instrument" that had no value except to the small handful of people who were nominally in control of it?
posted by Scientist at 9:24 AM on August 2, 2012 [1 favorite]


I always get anxious just testing anything that touches the money part of an ecommerce site, let alone this.

Would be kind of curious to know what the nature of the bug was.
posted by Artw at 9:24 AM on August 2, 2012 [1 favorite]


The problem here is definitely the IT guy in charge of the tool and NOT the business majors who came up with a plan to take humans out of the control loop.
posted by DU at 9:24 AM on August 2, 2012 [42 favorites]


The good news: The $440 million is not lost. It just moved to someone else.
posted by weapons-grade pandemonium at 9:26 AM on August 2, 2012 [36 favorites]


Sounds like someone just came back from DEFCON with a renewed realization of how powerful SysAdmins are and some craaaaaaazy ideas in his or her head.

And good on 'em.
posted by sibboleth at 9:26 AM on August 2, 2012 [1 favorite]


Oh, and as an engineer... BELT AND SUSPENDERS GUYS.

You want a separate team entirely just to write the idiot checking software that checks the results of the first software and shuts it off when it goes wrong.

This isn't rocket science - but they have that in rocket science too...
posted by lupus_yonderboy at 9:27 AM on August 2, 2012 [5 favorites]


I have the same question as Scientist above, but, in the meantime maybe a little sympathy at least for the "1,418 employees ... in 21 locations around the world" if the company tanks and they're out of a job?
posted by bitteschoen at 9:27 AM on August 2, 2012 [1 favorite]


Did they try turning it off and on again?

If that doesn't work, try taking it out and blowing on it.
posted by Theta States at 9:27 AM on August 2, 2012 [8 favorites]


*sigh* mods: would you mind fixing the two typos above? sorry!

Don't worry about it. Your second link is to the NYTimes and it includes this typo:

The Knight Capital Group announced on Thursday that it lost $440 million when it sold all the stocks it accidentally bought Wednesday morning because a computer glitch.
posted by nushustu at 9:27 AM on August 2, 2012 [5 favorites]


...so is there any progress in instituting a tiny percetange of tax on each high-speed transaction?
posted by Theta States at 9:28 AM on August 2, 2012 [12 favorites]


It appears that at these levels the stock market has become a game of Core War where the individual computer bits are fabulously expensive.
posted by localroger at 9:30 AM on August 2, 2012 [9 favorites]


I bet they mixed metric fucktons of money with imperial ones.
posted by Iosephus at 9:30 AM on August 2, 2012 [36 favorites]


I think the $440 million loss is for its own account, not its customers. However, it may still screw the mom & pop set to the extent they were Knight shareholders or potentially on the other side of the many orders that were executed in error.
posted by subtle-t at 9:31 AM on August 2, 2012


...so is there any progress in instituting a tiny percetange of tax on each high-speed transaction?

They should be honest about what all of this really is and call it a rake.
posted by backseatpilot at 9:31 AM on August 2, 2012 [4 favorites]


Don't worry about it. Your second link is to the NYTimes and it includes this typo:

Thanks nushustu! I feel less idiot now. I think just typing about this subject generates so much anxiety ("Veee must shut it down!! Call das help desk, ya??) that it makes one's eyes cross.
posted by Dean358 at 9:32 AM on August 2, 2012 [2 favorites]


My day job is a secretary in a completely different financial firm (which I shall not name).

All day yesterday, my boss and a handful of other big mucky-mucks were jumping in and out of emergency meetings with each other and basically freaking completely the hell out. I didn't think anything of it (I know jack shit about finance), but when this news came out late last night I though "oh, okay, that explains a lot."
posted by EmpressCallipygos at 9:33 AM on August 2, 2012 [2 favorites]


I have the same question as Scientist above, but, in the meantime maybe a little sympathy at least for the "1,418 employees ... in 21 locations around the world" if the company tanks and they're out of a job?
Do you know what they were trading? My sympathy is really highly dependent on how much harm they may have caused to the world. I don't cry for the employees of tobacco companies losing work, nor will I weep for grain speculators.
posted by Jehan at 9:37 AM on August 2, 2012


So how's that Haskell working out for you guys?
posted by RobotVoodooPower at 9:37 AM on August 2, 2012 [10 favorites]


My wife works in brokerage calculation at a large firm as well, and there was apparently a LOT of running around yesterday morning figuring out what was going on, as KCG is a 'market-making' (liquidity providing) operation, so this sort of failure was very noticeable.
posted by fet at 9:38 AM on August 2, 2012 [1 favorite]


it's not okay because if they take my stapler then I'll set the building on fire
posted by flabdablet at 9:38 AM on August 2, 2012 [14 favorites]


This is my surprised face.
posted by daq at 9:39 AM on August 2, 2012 [1 favorite]


Yes, I am job sucks!

Your fired.
posted by theodolite at 9:39 AM on August 2, 2012 [8 favorites]


Ironically Knight is being put out of business slowly but surely by the HFT guys. They aren't really HFT. And yes, the loss was shareholders. Their market making business doesn't use client capital.
posted by JPD at 9:40 AM on August 2, 2012 [1 favorite]


Note: Apparently the issue they had is that they had conflated "buy" and "sell" market making values in their software -- instead of buying low/selling high, they were doing the reverse -- basically nuking 15 cents per trade on hundreds of trades per second. Whoops!
posted by fet at 9:40 AM on August 2, 2012 [3 favorites]


DU: "The problem here is definitely the IT guy in charge of the tool and NOT the business majors who came up with a plan to take humans out of the control loop."

"We've had men in those silos since before any of you guys were watching "Howdy Doody"! Now I myself sleep pretty well knowing those boys are down there. "
posted by Chrysostom at 9:41 AM on August 2, 2012 [7 favorites]


I want to know how long it took before some bigwig at Knight yelled, "Who tested this?"

[/software tester]
posted by Currer Belfry at 9:41 AM on August 2, 2012 [3 favorites]


So we have finally automated the "fat finger fuckup". Well done, Wall Street,
posted by chavenet at 9:41 AM on August 2, 2012 [7 favorites]


Are you telling me that a high-frequency trader dealing in several hundred millions of dollars of stock didn't have any sort of logging or monitoring set up at all, and nothing to alert anyone to pull the plug on the servers the moment losses reach a certain threshold?
If that's the case then wow, you deserve to lose all that money Knight Capital.

I'm not even a year into being a sysadmin, and not even dealing with a fraction of the money they're throwing around, and I know and live by the golden rule that unless you log and monitor everything highly critical, you're going to have the carpet pulled out from your feet at any given point and you won't even know about it until you crack your head on the floor.
posted by drw------- at 9:41 AM on August 2, 2012 [4 favorites]


Do you know what they were trading? My sympathy is really highly dependent on how much harm they may have caused to the world. I don't cry for the employees of tobacco companies losing work, nor will I weep for grain speculators.

They're a market maker. They're not supposed to be taking proprietary positions. Marketmakers are meant to stand ready to execute orders for clients, and to take the opposite side of trades when there is an open interest (i.e., if the market wants to sell, market maker buys). The profit is supposed to come from the bid/ask (difference between what you're willing to pay for a stock and what you're willing to be paid to let go of a stock at the same point in time) and not from actual fluctuations in the price of the underlying.

This article has a list of the affected underlying stocks.
posted by subtle-t at 9:42 AM on August 2, 2012 [4 favorites]


Note: Apparently the issue they had is that they had conflated "buy" and "sell" market making values in their software -- instead of buying low/selling high, they were doing the reverse -- basically nuking 15 cents per trade on hundreds of trades per second. Whoops!

I bet they'll claim these as charitable donations on their taxes.
posted by theodolite at 9:43 AM on August 2, 2012 [2 favorites]


Did they try calling a mulligan?
posted by jason_steakums at 9:45 AM on August 2, 2012


The bad news is after they ship it to Dell for repair it will still come back broken :(
posted by WinnipegDragon at 9:46 AM on August 2, 2012 [1 favorite]


They're a market maker. They're not supposed to be taking proprietary positions. Marketmakers are meant to stand ready to execute orders for clients, and to take the opposite side of trades when there is an open interest (i.e., if the market wants to sell, market maker buys). The profit is supposed to come from the bid/ask (difference between what you're willing to pay for a stock and what you're willing to be paid to let go of a stock at the same point in time) and not from actual fluctuations in the price of the underlying.
Eh, then I guess they aren't bad. But it's best the be safe.
posted by Jehan at 9:47 AM on August 2, 2012 [1 favorite]


The problem here is definitely the IT guy in charge of the tool and NOT the business majors who came up with a plan to take humans out of the control loop.

...which is not to say that this kind of problem can't happen when humans are in the control loop. A friend working on trading software told me about a trader who lost some fairly large amount of money by placing puts instead of calls (or vice versa) over a several-hour period. He blamed the software. No other trader seemed to suffer the same problem, though, so there weren't any real consequences for my friend.


I suspect these kinds of losses are fairly common (if on smaller scales). The main reason why this one is so visible is not just because of the size, but because of Knight's role as a market maker.
posted by Slothrup at 9:48 AM on August 2, 2012


KCG is primarily acting as an agent for other firm's orders. They service many small brokerage firms who otherwise do not have the money or knowledge to build their own trading infrastructure. None of their clients lost money. They are also in compliance with all regulatory net capital rules. The trading occurred in about 150 NYSE stocks. If it makes y'all fell better, this MeFite made money in one of the stocks affected during the time the buys and subsequent sells were taking place. I provided liquidity for their algo on the way in and then the way out.

My $0.02, there are plenty of evil financial and trading firms out there, but these guys are not one of them.
posted by JohnnyGunn at 9:48 AM on August 2, 2012 [2 favorites]


The profit is supposed to come from the bid/ask (difference between what you're willing to pay for a stock and what you're willing to be paid to let go of a stock at the same point in time) and not from actual fluctuations in the price of the underlying.

Right, they're bookies.
posted by localroger at 9:50 AM on August 2, 2012 [3 favorites]


Anybody truly surprised by the fact that a careless software error could occur inside a system with this scale of consequence has not been reading enough snoofle.
posted by flabdablet at 9:51 AM on August 2, 2012


So how's that Haskell working out for you guys?

Any particular reason to believe they're using Haskell, as opposed to other languages commonly used in HFT software?
posted by Jpfed at 9:53 AM on August 2, 2012


OK, I am convinced that these guys are not particularly evil. So this was stupid of them, but I should maybe dial back the glee a bit. Can anybody give a good synopsis of what the likely fallout from this blunder is? Will it extend past KCG, to the stock market/financial sector in general? Is it likely to be of any consequence whatsoever for regular people whose involvement in the stock market maybe extends to having a 401K and perhaps a mutual fund for their kids' college tuitions? Is it likely to be a big enough thing that it will be of any political consequence come November? Inquiring minds want to know.
posted by Scientist at 9:53 AM on August 2, 2012


I'm sure it's only a glitch. A temporary setback. (Smoke rises from body of junior executive.)
posted by raysmj at 9:54 AM on August 2, 2012 [5 favorites]


Granted Knight isn't a HFT firm but how do those companies do error checking in their software? They are so dedicated to speed that they buy special super expensive low-latency networking gear and have their servers as close to the market servers in NY/NJ as they can physically get. Error checking would slow them down and cost them competitive advantage.
posted by Blue Meanie at 9:54 AM on August 2, 2012


Reminds me of the horror stories I've heard of programmers who write code for life-support or unstable systems.

Losing millions due to a missing comma is horrible enough, but having your code fail to shut down the radiation output of a device and harming or killing a room full of people is unthinkable--but happens.

It must take an iron will and total confidence in your abilities to do that kind of work. Not unsurprising every coder would rather write smartphone apps.
posted by WillingWonka at 10:02 AM on August 2, 2012 [2 favorites]


Scientist: "OK, I am convinced that these guys are not particularly evil. So this was stupid of them, but I should maybe dial back the glee a bit. Can anybody give a good synopsis of what the likely fallout from this blunder is? Will it extend past KCG, to the stock market/financial sector in general? Is it likely to be of any consequence whatsoever for regular people whose involvement in the stock market maybe extends to having a 401K and perhaps a mutual fund for their kids' college tuitions? Is it likely to be a big enough thing that it will be of any political consequence come November? Inquiring minds want to know."

THe likely fallout is that a few employees who fucked up will be offed and the shareholders will have lost $440 million and will be diluted when they recapitalize. No material public harm done. (Someone could have made a purchase at a too high price yesterday, but in the scheme of the markets, it is not a material item although I am sure it may be to the person who did it.)

They also did the most prudent thing they could with the error. As soon as they recognized it and stopped it, they turned around and liquidated it. They did not hold positions and try to trade out of it or try to find a buyer, they simply used another algo to get out as soon as they could.

This wasn't about speed. In fact, many of KCG's algos do the opposite. They slow down so that they do not have a material footprint on the price of the stock. They execute orders over DAYS. THey may be given an order to buy 200,000 IBM with instuctions to not pay higher than X and spread it out over 5 days.

They act as agent not principal. There goal is to affect best execution which is a combination of price and liquidity.
posted by JohnnyGunn at 10:03 AM on August 2, 2012 [4 favorites]


WillingWonka: "Reminds me of the horror stories I've heard of programmers who write code for life-support or unstable systems.

Losing millions due to a missing comma is horrible enough, but having your code fail to shut down the radiation output of a device and harming or killing a room full of people is unthinkable--but happens.

It must take an iron will and total confidence in your abilities to do that kind of work. Not unsurprising every coder would rather write smartphone apps.
"

Every time I fly through turbulence, I am thinking of the guy who wrote the software that flies the darn metal tube with wings. I hope those folks are not like me going to work with a hangover hoping to not get any calls that day.
posted by JohnnyGunn at 10:05 AM on August 2, 2012 [2 favorites]


In the event that KCG survives... Mr Joyce, have your people consider me when rebuilding your IT department. This sort of thing wouldn't happen on my watch.
posted by ceribus peribus at 10:07 AM on August 2, 2012


Any particular reason to believe they're using Haskell, as opposed to other languages commonly used in HFT software?

No, just a snark regarding the sometimes-made (erroneous) argument that a valid Haskell program is a correct program :)

I don't know anything about HFT, but I am sure this had nothing to do with PL choice because PL choice ultimately doesn't matter when it comes to robustness.
posted by RobotVoodooPower at 10:09 AM on August 2, 2012 [2 favorites]


Recently heard in the hallways of Knight Capital...

"So I shot the IT guy."

"Fired him, eh?"

"No ... I actually SHOT the IT guy."
posted by ZenMasterThis at 10:10 AM on August 2, 2012


Currer Belfry: "I want to know how long it took before some bigwig at Knight yelled, "Who tested this?"

[/software tester]
"

I *was* a software evaluation engineer. When I found hinky problems, they always told me That Will Never Happen.
posted by jgaiser at 10:10 AM on August 2, 2012 [6 favorites]


Knight Capital damn near had to pawn the round table. fortunately this:

$ hg ci -m "Corrected massive fuckup."
$ hg push
posted by vozworth at 10:10 AM on August 2, 2012


I wish I had a job to fuck up at.
posted by laconic skeuomorph at 10:12 AM on August 2, 2012 [12 favorites]


"Right, they're bookies."

I told you he'd understand.
posted by mr_crash_davis at 10:17 AM on August 2, 2012 [3 favorites]


Are you telling me that a high-frequency trader dealing in several hundred millions of dollars of stock didn't have any sort of logging or monitoring set up at all, and nothing to alert anyone to pull the plug on the servers the moment losses reach a certain threshold?

As I read it, the server malfunction didn't cause a loss-- it caused them to buy shares to the point that their own purchases were driving up the price, so the only justification for the higher price was that they were buying it.

The loss only became real when they tried to get rid of the shares. Without them propping up the price, they couldn't get near what they'd paid.

There's a big difference between investing and speculating.

Investing in a business is buying part of the business with the expectation that the business will do profitable things, like build factories, open stores and take out ads. You don't need to be smarter than other investors to make money investing.

Speculating is making short term trades with the goal of making money off of other speculators. Some other speculator must lose for you to win. This time it was these guy's turn to lose. Unless you think a company is going to be opening a store in the next 1/100 of a second, high frequency trading is speculating.
posted by justkevin at 10:18 AM on August 2, 2012 [2 favorites]


I wish I had a job to fuck up at.

Any IT experience?
posted by ChurchHatesTucker at 10:20 AM on August 2, 2012 [9 favorites]


Ouch. Still, it's far more forgivable than organized fraud.
posted by homunculus at 10:24 AM on August 2, 2012


Live by the sword, die by the sword.

Fuck 'em.
posted by Benny Andajetz at 10:27 AM on August 2, 2012 [1 favorite]


It appears that at these levels the stock market has become a game of Core War where the individual computer bits are fabulously expensive.

I'm absolutely not a bitcoin fan, but it's funny how seemingly the only difference between HFT and bitcoin mining is a question of scale.
posted by codacorolla at 10:29 AM on August 2, 2012


Benny Andajetz: "Live by the sword, die by the sword."

Interestingly, that is what they believe too and are taking their lumps. They are not trying to blame anyone else, they are not asking for a redo and they are not pawning the loss off onto customers. It just turns out it is a $440 million sword.
posted by JohnnyGunn at 10:35 AM on August 2, 2012 [2 favorites]


I was just reading the other day that it was determined that Knight Capital was behind a mini crash that wiped 10 percent off the stock market, before trading was frozen.
I can't find the article again amongst all the news about this latest event. I found references to a 2010 flash crash, in which Knight Capital played a minor role (excess trading broke one of their computers at a critical time, further destabilizing an already crazy event), but I was under the impression Knight had a more active responsibility for a big problem that happened more like ten years ago.
posted by -harlequin- at 10:39 AM on August 2, 2012 [1 favorite]


And it was no ones pension money at risk. Some rich people i.e Knight Cap owners are slightly less rich. Though equally other rich people, on the other side of their silly auto trades, may now also be richer. This could be your pension fund. But most likely another market maker.
Ultimately it all nets out
(minus transaction fees natch. Guys gotta make a livin')
posted by Damienmce at 10:42 AM on August 2, 2012


justkevin: Speculating is making short term trades with the goal of making money off of other speculators. Some other speculator must lose for you to win. This time it was these guy's turn to lose. Unless you think a company is going to be opening a store in the next 1/100 of a second, high frequency trading is speculating.

Except that Knight Capital isn't a high-frequency trading firm, as has been explained a few times in this thread already. What they are is a middleman who makes it possible for people to buy and sell stock more or less in realtime despite the fact that there's not necessarily anybody out there on the other end who wants to sell it or buy it at that particular moment. They make their money by setting the price of the stock. Here's my (undoubtedly oversimplified and probably somewhat incorrect) understanding:

Say you have 1000 shares of Acme Widgets that you want to sell, and the going rate is $100/share. So you're looking to make a cool $100,000 on your trade. Thing is, you can't find anybody out there at that very moment who actually wants to pay you a hundred grand for your shares and you don't want to wait around. So you go to Knight Capital (I assume this is actually all totally automated) who says "Sure, we'll buy those off you right now at $90 per share, no problem." So you unload your shares and collect your $90k which is fine because it saved you having to hunt down a buyer for the next five days or so and frees you up to deal with other things.

Meanwhile Knight Capital holds onto your shares for a bit and eventually finds someone who is willing to pay the going rate for them, or maybe a few days later somebody comes to them who wants to buy 1000 shares of Acme Widgets but can't find anybody that day who is looking to sell them. Knight Capital says "No problem, we'll gladly let go of them right this second for $110 per share." That person is happy to pay that even though it's a bit above going rate because it saves them having to hunt around for days and anyway they plan to hold onto those shares for a few years because they're expecting the company to be a good long-term investment so they plan to come out ahead even with the slight overpay.

End result is two happy customers and $20k for Knight Capital just for being there, being willing to facilitate deals (creating liquidity), and having the contacts and reputation as a clearing-house for stocks that allows them to find buyers and sellers quickly and efficiently.

It's not a high-frequency trading thing or a speculating thing, they're just basically performing a service for more traditional investors and keeping things liquid so that stocks don't get tied up for days and days and people can be more-or-less assured of being able to sell a stock quickly for at least close to whatever its going price is that day. Presumably without this service the entire market would be more or less paralyzed and nonfunctional -- until today I didn't realize these firms existed, but it's clear that they play a crucial role in the system which I had actually wondered about from time to time. The market is not a peer-to-peer network; firms like Knight Capital are essentially sort of routers or servers that sit at the center of the network and keep stocks moving, finding places for them to go and holding onto them for short periods when there isn't anywhere for them to go just then.

Did I get that mostly right, more-financially-literate MeFites?
posted by Scientist at 10:44 AM on August 2, 2012 [11 favorites]


Interestingly, that is what they believe too and are taking their lumps. They are not trying to blame anyone else, they are not asking for a redo and they are not pawning the loss off onto customers. It just turns out it is a $440 million sword.

Kudos to them. No, really; owning up to your own mistakes is actually raising the bar in today's corporate world. But, regardless of what happened, their whole business model is essentially theft. Nothing created, nothing supported.
posted by Benny Andajetz at 10:45 AM on August 2, 2012


This isn't auto trades, this is not HFT. Its just plain old market making. You know those pics of guys down in the pits they like to roll out when the market is down 5%? Yeah that's what these guys are. Over the last 12 years or so market making has moved from open outcry to being automated.

Again. This is the business being made into a buggy whip by the HFTs of the world.
posted by JPD at 10:45 AM on August 2, 2012 [1 favorite]


So I was involved in a very public glitch, a glitch that caused the CEO of a large company to have to stall for something like 2 hours while making a public annoucement. He actually stood on the stage frantically talking before the filing went through. I even made it in to the office before noon but everyone was all off watching the big event, I was watching the logs and saw hundreds of errors from the SEC. The error was caused by one regex that didn't match across line breaks. We lost that client and our company eventually went bankrupt, whoops.
posted by Ad hominem at 10:45 AM on August 2, 2012 [1 favorite]


As an IT person, I'd like to point out that this looks like a software application bug. IT departments do sometimes develop software, but generally not software of this scale, or software at the core of a business. IT is more about infrastructure and cobbling things together to make them work.

Now it could have been IT's fault, if for example they were asked to install the software and forgot to update important configuration values. From the sound of things, I doubt it.
posted by yath at 10:47 AM on August 2, 2012 [1 favorite]


But, regardless of what happened, their whole business model is essentially theft. Nothing created, nothing supported.

Look there are lots of finance niches where this true, and historically market makers were overpaid for the service they provide - but do they do actually provide a service. Essentially they match buyers and sellers and help smooth the mismatches between the two.

Companies need capital. That's why the stock and bond markets should exist. These guys help the stock market function.
posted by JPD at 10:48 AM on August 2, 2012 [5 favorites]


As someone who is presently employed writing software to double check software that someone else is writing and to prevent them to letting their code go live if it breaks something, I pin this entirely on the heads of the CTO and high-level managers for allowing the go-go-go culture of the trading firm to infiltrate into engineering procedures. Problem is, good engineering practice is directly opposed to "getting it out the door," which, in a sick firm, pits engineering against the business. The guy who committed the code with that bug in it probably did so at 9pm on a Tuesday after working 60 hour weeks for a month with no time off.

Knight was a sick firm. We are witnessing the cleansing process. All is well.
posted by deathpanels at 10:48 AM on August 2, 2012 [9 favorites]


As an IT person, I'd like to point out that this looks like a software application bug. IT departments do sometimes develop software, but generally not software of this scale, or software at the core of a business. IT is more about infrastructure and cobbling things together to make them work.

Now it could have been IT's fault, if for example they were asked to install the software and forgot to update important configuration values. From the sound of things, I doubt it.


I would be really really really shocked if this wasn't developed internally.
posted by JPD at 10:49 AM on August 2, 2012 [4 favorites]


I was watching the logs and saw hundreds of errors from the SEC. The error was caused by one regex that didn't match across line breaks. We lost that client and our company eventually went bankrupt, whoops.
Some people, when confronted with a problem, think "I know, I'll use regular expressions." Now they have two problems. - jwz
posted by crayz at 10:50 AM on August 2, 2012 [10 favorites]


As a SW testing consultant, I can vouch that sometimes these sort of things are discovered during testing, but then the bean counters won't let process to begin even get past the planning stages. At one job the formula worked this way (think Fight Club's "...a times b times c equals x. If x is less than the price of recall..."):

Estimated Man hours of resolution + estimated man hours spent testing solution + c = x

X = Average potential loss = low estimate of potential losses + maximum estimate of potential loss / 2

C = potential for indirect problems resulting from the implementation of resolution.

In my opinion, if there is even the remote likelihood that the maximum loss exists, that is the number you should work from. Plus C really can't be discerned without... Further testing.

You'd be alarmed how many our wise business majors' recommendation is the "let's wait and see" approach, and in what industries it's been implemented.

Seemingly unrelated side note: i have severe avid phobia. Not that the NDA will let me tell you why.
posted by Bathtub Bobsled at 10:50 AM on August 2, 2012 [1 favorite]


I would be really really really shocked if this wasn't developed internally.

So would I.
posted by yath at 10:50 AM on August 2, 2012


"avid phobia" is aviophobia, but my iPad has never heard of such a thing, I guess.
posted by Bathtub Bobsled at 10:52 AM on August 2, 2012



Seemingly unrelated side note: i have severe avid phobia. Not that the NDA will let me tell you why.


avid phobia? You don't like non linear editing? ;)
posted by cavalier at 10:53 AM on August 2, 2012 [2 favorites]


One thing this thread is making clear is that the good financial firms really need to help regulators and congress exert some pressure on the bad guys pretty soon because an angry public isn't going to be able to tell them apart.
posted by LastOfHisKind at 10:54 AM on August 2, 2012 [5 favorites]


avid phobia? You don't like non linear editing? ;)

Love it. I just prefer Inferno.
posted by Bathtub Bobsled at 10:54 AM on August 2, 2012 [1 favorite]


JPD: "Companies need capital. That's why the stock and bond markets should exist. These guys help the stock market function."

oh, but if we agree with that, how can we complain when people realize there's trillions in frozen capital in banks that can't be utilized in the markets?
posted by boo_radley at 10:55 AM on August 2, 2012


Have they tried the Microsoft backup disc to take them back to their last profitable trading position?
posted by MuffinMan at 10:55 AM on August 2, 2012 [1 favorite]


Bathtub Bobsled, that's some awful statistics there. The formula only looks at the mean estimated loss and doesn't even attempt to look at what the loss could be if the situation played out a couple of sigmas away from the norm. And yeah, three sigmas covers 99.7% of cases, but in a large firm where you're doing a thousand cases a day, that means that three times per day you're going to get an event that looks nothing like the model predicts.

The problem is that there's probably not enough data to actually build a solid distribution curve, but somebody's job is to come up with a scientific-looking formula anyway, and so people just brainlessly go ahead with the busted-ass formula and then act all surprised when it eventually blows up in their face and takes the whole business with it.
posted by Scientist at 10:57 AM on August 2, 2012


Companies need capital. That's why the stock and bond markets should exist. These guys help the stock market function.

Agreed but, more often than not, companies like Knight facilitate traders filling orders for stocks they do not own, take their fees and commissions, and then worry about what to do. I'd argue that that's not an essential function.
posted by Benny Andajetz at 10:58 AM on August 2, 2012


From their latest 8-K filing, they have approximately $360 million cash on hand and total equity of $1.5 billion. I think they'll weather the storm with some financing.
posted by Rhomboid at 10:59 AM on August 2, 2012


So the stock market shouldn't exist? Because if you don't have someone making the market it doesn't exist.

The big argument about HFT is that it destroys the market makers business model but when something goes wrong they (HFTs) disappear and there is no one there to provide liquidity.
posted by JPD at 11:01 AM on August 2, 2012


Well I still wirte software for Wall Street. I write software to do visualization of of financial data. It is time critical though since people always want to see the data now and wait till the last possible moment to look at it before XY or Z has to happen as required by the SEC. I don't know about HFT software, but there is kind of a revolving door so we sometimes hire those guys when they want a change of pace. We don't really have a GO-GO-GO attitude. We have an army of testers here and in india as well as entire seperate groups of internal users for UAT. Management hired some guys from Disney (apparently disney is good at process management?) to manage an entire ecosystem around the development of one relatively minor product. Obviously there are unknown unknowns so we don't really know until the rubber meets the road. There are an infinite amount of possible inputs and there is no possible way to test them all. Clients are like a million monkeys typing, they are going to unearth a bug eventually.

Some people, when confronted with a problem, think "I know, I'll use regular expressions." Now they have two problems. - jwz

I try remove regexes when I find them now because I don't think they are testable. If we have to use one, I try to limit what it is responsible for.
posted by Ad hominem at 11:06 AM on August 2, 2012 [1 favorite]


So the stock market shouldn't exist? Because if you don't have someone making the market it doesn't exist.

The big argument about HFT is that it destroys the market makers business model but when something goes wrong they (HFTs) disappear and there is no one there to provide liquidity.
For me--and I speak only for me--it would be nice if they worked a little slower. If would cut down the gambling and speculation, and return them to their core role of investment.

Investment--yay, good!
Gambling--boo, bad!
posted by Jehan at 11:09 AM on August 2, 2012 [2 favorites]


So the stock market shouldn't exist? Because if you don't have someone making the market it doesn't exist.

That's not true. You don't need third parties to make a market, buyers meeting sellers is sufficient.
I agree though that many third parties do add value and perform useful services.
posted by -harlequin- at 11:28 AM on August 2, 2012


Companies need capital. That's why the stock and bond markets should exist. These guys help the stock market function.

Yeah right - all the Banksters on Wall St are self-less public servants trying to help mom and pop raise capital. Cut me a break. These guys are in it for the money. They do not give a crap about "companies need [for] capital".

I feel nothing for them. They are lower than ambulance chasing lawyers.
They relied on a computer program, it burned. I laugh at them.
posted by Flood at 11:32 AM on August 2, 2012


I can't believe I'm the first to admit it, but this?
Theta States: If that doesnt work, try taking it out and blowing on it.
This would certainly fix my glitch!
posted by hincandenza at 11:40 AM on August 2, 2012


I try remove regexes when I find them now because I don't think they are testable.

Why not? I can see a viewpoint of "we don't really know what this regex-based solution will do unless we test it against infinite variations of input, which is...inconvenient" But that would seem to be the case for other implementations as well (buffer overflows, memory constraints, character sets, etc.).

I see people advocating state machines for protocol processing, and it seems like there are good reasons behind this approach. But what are regexes if not state machines?
posted by RikiTikiTavi at 11:46 AM on August 2, 2012


If Knight Capital is going to "take their lumps" as it were, why are trades being cancelled?
posted by RikiTikiTavi at 11:48 AM on August 2, 2012


My day job is a secretary...

Your day job has its own job?
posted by steambadger at 11:48 AM on August 2, 2012 [1 favorite]


For once the Hacker News discussion of this story is better than Metafilter. Some things I learned over there:

Nanex (previously) has an analysis showing a millisecond-scale graph of the trades. It looks like their algorithm was buying and selling the same stock many times a second and losing the spread every trade.

What happened to Knight's risk controls? Traders like them are required to have risk checks watching over the trading activity. How come they didn't catch this while it was happening?
posted by Nelson at 11:49 AM on August 2, 2012 [4 favorites]


Yeah right - all the Banksters on Wall St are self-less public servants trying to help mom and pop raise capital. Cut me a break. These guys are in it for the money. They do not give a crap about "companies need [for] capital".


wait where did I say that? All I said was market making was fee for service not theft. Of course they aren't altruistic.

You don't need third parties to make a market, buyers meeting sellers is sufficient.
That's what market makers do. They introduce buyers to sellers and facilitate a transaction. Its Ebay basically.
posted by JPD at 11:49 AM on August 2, 2012 [1 favorite]


Look, I'm as radical left as the next guy but whenever somebody uses the word "Banksters" I kind of die a little inside. It's like when people say "sheeple" or "Micro$oft". It kind of makes me think of the person saying it as being sort of a mindlessly-contrarian conspiracy theorist who can't get past their ideological hatred and actually take the time to attempt to understand their enemy.

I know that's uncharitable and all and I shouldn't stereotype people just because they affect a sort of awkward and immature countercultural dialect, but I thought it worth mentioning that even people like me who identify ideologically as anti-capitalist, pro-egalitatianism, pro-collectivism, pro-consensus-based-decisionmaking sort of wince whenever somebody around them says "Banksters". I mean I get it, very cute and all, but how can you expect anyone to take you seriously if you won't talk like a grown-up?
posted by Scientist at 11:55 AM on August 2, 2012 [16 favorites]


That's what market makers do. They introduce buyers to sellers and facilitate a transaction. Its Ebay basically.

I thought market makers were supposed to serve as the second party.
posted by Benny Andajetz at 11:57 AM on August 2, 2012


Yeah right - all the Banksters on Wall St are self-less public servants trying to help mom and pop raise capital. Cut me a break. These guys are in it for the money. They do not give a crap about "companies need [for] capital".

I feel nothing for them. They are lower than ambulance chasing lawyers.
They relied on a computer program, it burned. I laugh at them.


You mentioned ambulance-chasing lawyers. Obviously, they're scumbags. But this doesn't mean that personal injury lawyers are all bad people, or that personal injury suits are a bad thing. We have them for a reason; when they aren't abused, they're a good way to make people responsible for hurting someone pay.

Same situation. Finance isn't inherently evil unless it's abused. Our economy wouldn't function without finance. Computer trading also isn't inherently a bad thing, although it can be dangerous. And, from what I read, Knight are more or less honest. They're not looking for a bailout, they're taking responsibility.
posted by vogon_poet at 12:00 PM on August 2, 2012 [1 favorite]


Let's not forget that perennial favorite AmeriKKKa.
posted by borges at 12:00 PM on August 2, 2012


memory constraints, character sets

Very very true. We run into problems with both of those all the time. I can't stop users from uploading 500mb xml docs or littering them with Yen symbols and even things the SEC will not accept, like SmartQuotes. I can make sure we aren't doing braindead things like trying to run a regex against a 500mb xml doc.
posted by Ad hominem at 12:00 PM on August 2, 2012


but having your code fail to shut down the radiation output of a device and harming or killing a room full of people is unthinkable--but happens.

What? I don't doubt your premise at all, but when did THAT happen?
posted by ctmf at 12:04 PM on August 2, 2012


vogon_poet, while it's outside the scope of this discussion I would just like to point out that there is a coherent and (to some) very persuasive argument that finance is inherently evil, and that the foundational premises of our economy are doomed to engender abuse, human suffering, and eventual catastrophic collapse. I'm not here to push that argument (fuck knows we have other threads for that) but I'd like to point out that it exists and that the some of the folks here (including, to some extent, myself) are coming from that admittedly radical and fringe perspective.
posted by Scientist at 12:04 PM on August 2, 2012


I thought market makers were supposed to serve as the second party.

I'm not totally clear what "Second Party" means.

What they tell you is the bid price and the ask price and they get paid the difference between the actual bid/ask and the pricing they showed you. they carry inventory for fractions of a second if they are doing their job correctly, and make a small spread on the bid-ask spread itself.
posted by JPD at 12:05 PM on August 2, 2012


What? I don't doubt your premise at all, but when did THAT happen?

Fatal Dose
posted by maxwelton at 12:07 PM on August 2, 2012 [3 favorites]


That's what market makers do. They introduce buyers to sellers and facilitate a transaction. Its Ebay basically.

Yup - the market can and does exist without them. But they can make the market better.
posted by -harlequin- at 12:09 PM on August 2, 2012


What they tell you is the bid price and the ask price and they get paid the difference between the actual bid/ask and the pricing they showed you. they carry inventory for fractions of a second if they are doing their job correctly, and make a small spread on the bid-ask spread itself.

I was picking a nit, but it's important. The market maker is not matching buyers and seller, it is the buyer/seller.
posted by Benny Andajetz at 12:10 PM on August 2, 2012 [1 favorite]


vogon_poet, while it's outside the scope of this discussion I would just like to point out that there is a coherent and (to some) very persuasive argument that finance is inherently evil, and that the foundational premises of our economy are doomed to engender abuse, human suffering, and eventual catastrophic collapse. I'm not here to push that argument (fuck knows we have other threads for that) but I'd like to point out that it exists and that the some of the folks here (including, to some extent, myself) are coming from that admittedly radical and fringe perspective.

You're right. I was tempted to add a caveat about "assuming capitalism" but I didn't. But I think the point stands that finance helps capitalism run smoothly, and is a good thing insofar as you like capitalism (which, broadly, I do). Firms like Knight are at worst complicit in a bad system; they're not actively doing any damage beyond helping it function.
posted by vogon_poet at 12:20 PM on August 2, 2012


I mean I get it, very cute and all, but how can you expect anyone to take you seriously if you won't talk like a grown-up?

I appreciate that some people think the national dialog should be played out like a gathering of the Algonquin Roundtable or a bipartisan panel at the Brookings Institution, but this isn't really how the world works. I don't think I would use the term "banksters", but it is clever and it seems to be good enough for The Economist.
posted by deanc at 12:21 PM on August 2, 2012 [1 favorite]


I was picking a nit, but it's important. The market maker is not matching buyers and seller, it is the buyer/seller.

Why is that important? They aren't trying to profit from the time period they own the asset. They are trying to profit from the prices they set before the transaction occurred.

If they make money off of gains on their inventory they are not doing their job.
posted by JPD at 12:24 PM on August 2, 2012


As market makers, they are making riskless principal trades. They will buy when they already have a buyer in hand and sell when they already have a seller in hand. On NASDAQ stocks, they don't charge an actual brokerage fee when they take a marketup on the trade. On listed stocks they act as pure agent and simply charge a commission.
posted by JohnnyGunn at 12:29 PM on August 2, 2012


I see people advocating state machines

We had some other people working on some sort of DSL based on Microsoft's M data modeling language. The theory was we would be able to define types for all GAAP terms. Of course that kind of spiraled because we also have to support IFRS, and Her Majesty's Revenue and Customs standards.
posted by Ad hominem at 12:34 PM on August 2, 2012


Regular expressions are not a good tool for anything where you can't afford to fail.

The only reason you're using a regular expression in the first place is because no one specified any actual data interchange format. So you're reduced to guessing what pattern is being used to generate the data you're receiving.

There's also the issue that for most of the existing regexp parsers, it's possible for individual matches to take an extremely long time to complete for some patterns - this is why re2 was written.

If you are going to do something very risky like regular expressions, you need a battery of tests for edge cases like empty lines, lines with carriage returns, lines with leading or trailing spaces or without leading or trailing spaces, etc.

My theory - never use regular expressions, always force the guy sending you data to specify exactly what you can possibly get, then write to that specification exactly and do a lot of testing.
posted by lupus_yonderboy at 12:51 PM on August 2, 2012 [9 favorites]


The market is not a peer-to-peer network; firms like Knight Capital are essentially sort of routers or servers that sit at the center of the network and keep stocks moving, finding places for them to go and holding onto them for short periods when there isn't anywhere for them to go just then.

Yup. Market makers provide liquidity making sure you can buy and sell at any given time. It's nice steady work, without too much risk (but definitely still some) as you're not actually taking a position. Their margins have, quite rightly, been getting slammed in recent years as the whole thing becomes electronic and straight thru processed. They're all now competing to offer the sexiest trading platform, tightest spreads, most liquidity etc.

In terms of directing anger towards the financial services industry, I would mostly direct it to mortgage brokers and realtors and structured product sales people and senior management.

Rank & file M&A bankers, indeed traders, RMs despite being grossly overpaid, aren't particularly responsible for the current crisis. It was bad loans made to poor people (mortgage brokers) for over valued properties (realtors) which were packaged and sold (SP sales) to everyone and their dog. Oh, and Alan Greenspan too. Mostly him.
posted by Damienmce at 12:59 PM on August 2, 2012


Any IT experience?

Is that important if I wanna work in IT?
posted by ZenMasterThis at 1:15 PM on August 2, 2012 [4 favorites]


>>Any IT experience?

>Is that important if I wanna work in IT?

If we had an edit window I would have added, "Not that it matters."
posted by ChurchHatesTucker at 1:23 PM on August 2, 2012


Wait, regexes are risky now? Wait till you guys see horrors like LL1 parsers!
posted by Jpfed at 1:28 PM on August 2, 2012 [4 favorites]


A "little glitch" in the trading software used by Knight Capital caused them to lose $440 million dollars in the stock market yesterday

One of the reasons that I'm all for outlawing these sorts of trading programmes, as well as restrictions on retrading stocks more than once a day; take some of the velocity out of the markets.
posted by MartinWisse at 2:08 PM on August 2, 2012


I too long for the days when the very wealthy spent their days in various London coffee house trading slips of paper. I wonder if there is a market for such a firm, set up to look like a turn of the century coffee house or gentleman's club. Clients could drop by to drop off bundles of pounds sterling and collect their certificates, but only after engaging in a proper amount of social pleasentries. Make the entire thing a bit more civilized.
posted by Ad hominem at 2:19 PM on August 2, 2012


In terms of directing anger towards the financial services industry, I would mostly direct it to mortgage brokers and realtors and structured product sales people and senior management.

I suspect the larger cause of the housing bubble lies with the CDO industry and ratings agencies. The mortgage industry wouldn't have the means to approve large quantities of loans to "poor" people if they weren't able to immediately take their cut before it is all immediately transferred off their books, packaged into CDO's, and sold into our pension funds and 401k's as AAA securities. Mortgage rates were tied more closely to LIBOR than to the Fed rate. Mutual fund and pension fund managers don't have a lot of incentive to prevent HFT's from front-running their larger trades--which is probably how HFT's make the majority of their money, not by market making. And the fund managers are probably using their shares for leverage or lending them out to traders for shorting without sharing these profits with the consumer. The average consumer is just putting money away in their 401k or pension fund and not really understanding what happens to it, and this is why good government oversight is needed.
posted by Golden Eternity at 2:58 PM on August 2, 2012


In terms of directing anger towards the financial services industry, I would mostly direct it to mortgage brokers and realtors and structured product sales people and senior management.

No, the entire financial industry is rotten from top to bottom. There is no segment of the industry that has not been subject to fraud -- over and over again. Banks with their robo-signings and illegal foreclosures, credit card price fixing, LIBOR price fixing, proprietary traders betting against their own clients, commodity traders stealing customers money, banks conspiring to fix prices of municipal bonds, CDO fraud and lying to clients, rating agency fraud, mortgage broker fraud, insider trading fraud, corporate accounting fraud, auditor fraud, illegal overdraft charges, insurance fraud. There is not a single major bank that has not paid fines for stealing money. Yet no one goes to jail. Fines are just a cost of doing business. Their only job is to take money from your pocket and put it in their pocket.
posted by JackFlash at 3:30 PM on August 2, 2012 [6 favorites]


ctfk,

It actually happened. Horrific.
posted by j_curiouser at 3:51 PM on August 2, 2012 [1 favorite]


WillingWonka: "It must take an iron will and total confidence in your abilities to do that kind of work. Not unsurprising every coder would rather write smartphone apps."

No it takes the usual will combined with total confidence in the system behind you that allows your team as a whole to produce bug free code. Unfortunately, few teams bother to do the necessary planning and review because it ends up taking about a day's worth of meetings, checking, and double checking to write a line of code. And that's why people get killed by radiation therapy machines. (that and the company was too cheap to install a mechanical safety system as a backup)
posted by wierdo at 3:52 PM on August 2, 2012 [1 favorite]


d'oh...sorry ctmf
posted by j_curiouser at 3:54 PM on August 2, 2012


the entire financial industry is rotten from top to bottom. There is no segment of the industry that has not been subject to fraud -- over and over again.

Dude, even if I WANTED to commit fraud I don't know anywhere near enough about finance to do so, and I'm not the only secretary like that. (I feel ya, but seriously, there are segments of innocence.)
posted by EmpressCallipygos at 4:01 PM on August 2, 2012 [2 favorites]


Our economy wouldn't function without finance.

I love this argument - it basically implies, the banksters are too important to hate. We need to respect them because we couldn't live without them.

What a massive pile of BS that is !!! Cops, soldiers, and plumbers are MUCH more important to our society than finance guys. Without those professions, the civil society in which all the suit-and-tie banksters move would not even exist.

Yet, if anyone in any of those other professions committed massive systemic fraud - they would be burned in a second. They would go to jail. Other members of the those professions would be the first ones that wanted to see the guilty parties go down.

What do banksters say? No, don't be angry with Jamie Dimon or Lloyd Blankfien - you have to understand the importance and the complexity of their job. Banksters defend the corruption within their own industry. And thus, a pox on you all.
posted by Flood at 4:40 PM on August 2, 2012 [1 favorite]


Wow. Gotta follow that.

On a speculative impulse I bought their stock today...figuring sorta my business, they are a bunch of smart, reasonably honest guys, good at their job. They will come back. No one making equity markets is minting money these days...not upon reflection, might have been a mistake. Don't make investment decisions in your gut...

Also re similarity with this and the 07-08 financial crisis is low...many conflating issues.

I still don't understand why the ratings agencies heads were not perp walked downtown. *shakes head*
posted by sfts2 at 4:51 PM on August 2, 2012


not=but
posted by sfts2 at 4:52 PM on August 2, 2012


Regular expressions are not a good tool for anything where you can't afford to fail.
This is ridiculous.
The only reason you're using a regular expression in the first place is because no one specified any actual data interchange format. So you're reduced to guessing what pattern is being used to generate the data you're receiving.
Okay, NOW I see the problem you're talking about, and it has nothing to do with regular expressions. The problem is you're trying to parse something whose format you don't know. That is not something you should do if you can't afford to fail. Whether you're using regular expressions or not is completely unrelated.

Yes, many peoples' reaction to trying to solve a text-processing problem they don't understand is to throw a regexp at it, and this really doesn't help them in the long run (cf. the jwz quote about trying to parse HTML, a context-free language, with a regular expression). So, sure, excessive use of regexps can be a code smell.
for most of the existing regexp parsers, it's possible for individual matches to take an extremely long time to complete for some patterns
Regexps are mini-languages, and like a program written in any language, a regexp has time and space complexity. If someone is writing a system with realtime requirements and a dangerous or costly failure mode, and doesn't understand how to reason about that, they're in the wrong line of work. The "flail randomly until something compiles and passes testing" style of development will get you surprisingly far and is very popular, but sometimes when you have an extremely well-studied problem like parsing ferchrissake you can do better by catching up on some 50-year-old computer science and actually doing a little software engineering.
always force the guy sending you data to specify exactly what you can possibly get, then write to that specification exactly
Here I agree with you 100%— but I have to point out that quite often, those specifications define the possible inputs in the form of a grammar (EBNF or whatever), and when all or most of that grammar is a regular language, well, you can translate that exactly into a regexp. Probably more readably and reliably than hacking together a lexer in the host language.
posted by hattifattener at 5:19 PM on August 2, 2012 [5 favorites]


I love this argument - it basically implies, the banksters are too important to hate. We need to respect them because we couldn't live without them.

Well, no, a lot of them are pretty hateable. But their job, when they do it right, actually is important. In the same way that corrupt police are bad but having a police force is good. (And from what I can tell, Knight Capital are, if not exactly the Serpico of financial firms, at least not corrupt. They were playing with their own money here, and they lost it because of a stupid mistake, and they're going to accept that and move on.)
posted by vogon_poet at 6:04 PM on August 2, 2012


It may indeed be the case that HFT is not what Knight is supposed to be doing. That could explain why they were so spectacularly bad at it.
posted by flabdablet at 7:03 PM on August 2, 2012 [1 favorite]


Man, flabdabet, I just saw those same graphs (pointed there by reddit). I sure don't understand everything about them, but even I can see that there is weird stuff going on in the markets. There's also an interesting opinion an what happened that I would like to understand better.
posted by benito.strauss at 7:10 PM on August 2, 2012 [1 favorite]


In my head I've got the scene from Airplane! when Johnny unplugs the landing lights. "Just kidding!"
posted by deborah at 7:15 PM on August 2, 2012 [1 favorite]


Basically, they were just trying to get going on NYSE's new Retail Liquidity Price (RLP), but instead seem to have put some of the testing logic into some of their regular trading activity.

It would not surprise me at all to find that a large financial institution contains managers clueless enough to attempt to reduce IT costs by implementing at least partial developmestuction.
posted by flabdablet at 10:27 PM on August 2, 2012 [1 favorite]


Maybe... buying and selling millions of shares a minute is a bad idea?

Yeah. Call me crazy, but if we tax transactions that aren't considered to be of social value, and we're afraid of the consequences of high speed trading, then an obvious solution presents itself.
posted by mhoye at 5:21 AM on August 3, 2012 [1 favorite]


The European markets are considering a small per-transaction tax. It would radically alter the way those markets work and needs a lot of care in design.
posted by Nelson at 7:25 AM on August 3, 2012


The European markets are considering a small per-transaction tax. It would radically alter the way those markets work and needs a lot of care in design.

The trading world has already mostly figured out ways around transaction taxes. So they fail in their goal of reducing velocity, and they doubly fail because they increase complexity and risk because of the structures created to avoid them.
posted by JPD at 7:38 AM on August 3, 2012




homunculus: "This is What Wall Street's Terrifying Robot Invasion Looks Like"

Related Reuters article.
The Skynet Funding Bill is passed. The system goes on-line August 4th, 2008. Human decisions are removed from the financial markets. Skynet begins to learn at a geometric rate. It becomes self-aware at 2:14 a.m. Eastern time, August 29th. In a panic, they try to pull the plug.
posted by schmod at 9:14 PM on August 7, 2012


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