It was a big position unroll that was supposed to happen over "several" days, and accidentally or error-ly got executed on something more along the lines of a "minutes" timescale. Shit happens. Obladi oblada.
Nanex claims a stock was just buying at the offer and selling at the bid. I can see a programming error causing something like this, but generally only if it's a midpoint order or something, where you send the order through the price. I'm curious what actually happened.
I'm as curious as anyone. I'd like to know why they didn't pull the plug on the misfiring algo after, say, 2 minutes.... the buying/selling occurred for 29-straight minutes. Knight's a good group of guys, I was sorry to see this mistake happen. Also, what are the losses? $10mm? $100mm?
I feel sorry for Knight employees who had no involvement in today's saga. But the multi-hour delay in the NYSE deciding which trades to bust and which ones not to bust shows that there still remains too many unanswered questions regarding the certainty of entering into trades. I was fortunate enough to have profitable trades in RSH and NOK, but if they had been busted, not only would I 'lose' those profits, I'd also be sitting on unrealized losses from my buy orders. I'm glad that (apart from 6 stocks) the rest of the trades were not busted - regardless of whether or not Knight is a "good group of guys".
I don't know how it works in equities but it doesn't sound like ONE MM algo going crazy( one you could pull the plug on in 30 sec), it's more like all Knight's execution network had a problem and they couldn't find how to isolate/ stop it without shutting all their activities.
http://www.bloomberg.com/news/2012-08-02/knight-bruised-as-analyst-estimates-170-million-loss.html Knight Bruised as Analyst Estimates $170 Million Loss "The errors were caused by a malfunction in a trading algorithm, according to a person at Knight who asked to remain anonymous because the matter hasnât been publicized. "
WSJ http://blogs.wsj.com/marketbeat/201...ing-error-cost-firm-440-million/?mod=yahoo_hs "Knight Capital: Trading Error Cost Firm $440 Million" Knight Capital just disclosed a pretax loss of $440 million due to yesterdayâs trading error. Shares are down 42% at $4.02 in premarket trading, on top of yesterdayâs 33% slide. Hereâs the press release: PRESS RELEASE: Knight Capital Group Provides Update Regarding August 1st Disruption To Routing In NYSE-listed Securities JERSEY CITY, N.J., Aug. 2, 2012 /PRNewswire/ â Knight Capital Group, Inc. (NYSE Euronext: KCG) today provided an update on the August 1, 2012 disruption to routing in NYSE-listed securities. As previously disclosed, Knight experienced a technology issue at the open of trading at the NYSE yesterday, August 1st. This issue was related to Knightâs installation of trading software and resulted in Knight sending numerous erroneous orders in NYSE-listed securities into the market. This software has been removed from the companyâs systems. Clients were not negatively affected by the erroneous orders, and the software issue was limited to the routing of certain listed stocks to NYSE. Knight has traded out of its entire erroneous trade position, which has resulted in a realized pre-tax loss of approximately $440 million. Although the companyâs capital base has been severely impacted, the companyâs broker/dealer subsidiaries are in full compliance with their net capital requirements. Knight will continue its trading and market making activities at the commencement of trading today. The company is actively pursuing its strategic and financing alternatives to strengthen its capital base.