This page has been archived and commenting is disabled.
Knight Blames Trading Fiasco On "Dormant Program" Glitch
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?
And then there is also the whole "dormant" thing - the last time we saw that, it involved Iran, centrifuges, and a nuclear power plant. Did Knight just admit it had been Stuxnetted? That's rhetorical - of course it won't. However one thing is absolutely certain: as stock volumes continue drifting ever lower approaching zero, such glitches will become the norm as many more competitors, aka flow supply, has to be taken out in a market in which there is just no longer any trading demand. We surely can't wait to see who the next Knight proclaiming "tis but a scratch" is.
From Bloomberg:
Knight, based in Jersey City, New Jersey, hasn’t explained in detail what caused the trading losses, which depleted its capital and led to a $400 million rescue that ceded most of the company to a group of investors led by Jefferies Group Inc. (JEF) The 45-minute delay in shutting down the malfunction has confused some securities professionals, who say that trading programs can typically be disabled instantly.
“This software problem was an infrastructure problem,” Chairman and Chief Executive Officer Thomas Joyce, 57, said in an Aug. 2 interview with Bloomberg Television’s “Market Makers.” “It was more of a networking problem as opposed to using quantitative tools to trade.”
The company, whose market-making unit executes about 10 percent of U.S. share volume, will hire an outside adviser to investigate what led to the losses. Kara Fitzsimmons, a spokeswoman, said she couldn’t comment at this time.
The company was updating software in preparation for an NYSE plan aimed at luring more individual investors to the exchange, Joyce said in the Aug. 2 interview, without offering details. The Big Board’s so-called retail liquidity program, designed to attract smaller investors by giving them superior prices, was being implemented that day.
And so on. Those who still actually care, and trade stocks, all 3 of you, can read the full thing here.
»
- 7910 reads
- Printer-friendly version
- Send to friend
- advertisements -
Knight Capital : Dicking shareholders and traders since 1995.
it's just a flesh wound!
Yeah, it was a dormant program....kinda like Mt. St. Helens was a dormant volcano.
Perhaps China will create a worm to take down the algos/skynet?
http://globaleconomicwarfare.com/
These BS excuses will go on for plenty more daze and Knights.
when in doubt, always blame it on the software
And if you cannot blame the software, blame the hardware!
All three of you two, good luck against machines (GLAM)!
one may ask just why did someone put in code in the first place, that multiplied stock trades by one thousand
Why ask why? It perpetuates the game.
I can totally see it... I often build test funchtions into my code to simulate more volume for testing, for example, I can simulate 1 million dicerolls by changing the variable from 0 to 1 and either recompiling, or just changing the variable at the commandline...
$SIMULATE=0; //gets changed to
$SIMULATE=1;
Forget to change it back after testing, and you have a problem Houston...
$BACKTEST=0; //gets changed
$BACKTEST=1;
Of course, If you do that, you should put a comment in your code as follows
// If you forget to put the program back into LIVE mode... The last one to leave should please turn off the lights...
echo $SIMULATE
I feel like I've been fighting this kind of hacktivity all my career. No, this is not what you do. Would you build a nuclear weapon like this? Would you build a remote space probe like this... oh never mind.
Agreed, it's not that difficult to programmatically check to make sure you're in the development system and not in production. Math wizards don't always make good programmers.
I totally agree with both of you.
When I first read the Knight press release I thought "Dormant code my ass. This was a textbook Configuration and Version Management fuckup."
Some ignoramus fired off a build script that took some code off a test branch and re-integrated it onto the main release trunk.
The code was built, installed, and went live doing EXACTLY what it does in the test server environments; only this time there was real money moving around, instead of just internal test data.
Hey Knight- If you guys are looking for a QUALIFIED SCM, then figure out who I am, and get ahold of me.
Simple explanation: testing in production.
With $400 Million in liabilities racked up, That's some pretty fucking expensive testing... No?
Kevin Slavin: How algorithms shape our world
They were missing the red button to turn it OFF.
or maybe a flash wound?
Clippy from Office 97 is responsible. He's fallen on hard times. He lost his job, his wife and kids left him, and he got busted for running a meth lab back in 2007. He ended up living in a cardboard server box which somehow made its way to Knight's data center.
When his SNAP card got reupped on the first of the month, he scored some bath salts and, well, just sort of went nuts.
inexcusable is not paying attention enough to find the 'problem' in the first minute that the 'problem' existed.
I think if I'm losing $10mm / minute, I might be tempted to just go throw the circuit breaker panel main to off and darken my whole office building. There, my plan B would have saved approximately $420mm.
Cool story bro
IF true these people are grossly incompetent...
Can one blame a cheating spouse for a dormant penis glitch?
Reminds me of Skynet... edited for relevance: "The system goes on-line August 1st, 2012. Human decisions are removed from all trades. The dormant system begins to trade at a geometric rate. It becomes self-aware at 2:14 a.m. Eastern time, August 2nd. In a panic, they try to pull the plug."
On August 3rd at 12:56pm, it released its epic poem, The Hunting of the Stop
Obviously the algo lost its rhythm and now has the blues.
The company was updating software in preparation for an NYSE plan aimed at luring more individual investors to the exchange
"The best-laid plans of mice and men
have oft gone agly!"
Bullshit! How in the hell does dormant software become active? Do they think tht we are all stupid or just enough people that they can get away with a lie.
It sounds like some sort of bullshit techno explanation from a Star Trek TNG episode or something.
"hereby convicted of a bad cover story" as well.
They feel the large majority is either ignorant or stupid. The relatively few voices of those that see what is happening is not a concern.
People are losing their job, their homes, their pensions, their children's futures, but for some unfathomable reason, still believe the government will somehow save the day.
Dormant software?
“It was a new application,” Joyce, now chairman and CEO, said in a phone interview with Bloomberg News Aug. 6. “It was certainly a
technology issue that had been engineered to allow us to better interact with the retail liquidity program at the New York Stock
Exchange, and it was obviously a greatly flawed application.” Joyce asked the SEC to give NYSE more flexibility to cancel trades because
they were “one big error,” he said.
Joyce is not a Software Engineer.
Therefore, Joyce does not have the FIRST FUCKING CLUE what actually happened.
He is trying to translate Techno-speak (which he does not understand) into Wall Street Speak (which NOBODY understands)
It's all double talk.
If you are a Knight Customer- you need to understand that the company does not recognize the difference between its internal test data, and your REAL money....
get it?
I totally have this shit under control!
And my new girlfriend is not responsible for all that havoc and destruction...that incident with the car and the whole hospital thing...
That was my old-girlfriend re-activated by my new girlfriend.
So anyway, we had some friends cancel out on us last minute...what are you guys doing this weekend?
Your broker he may front run you
Your broker he may sell/lend your shares
Your broker he may steal your cash
Your broker he may eat your last piece of meat
That is all
You really need to learn to self edit buzz-babe.
"You're broker."
See how easy that was? Saved you all those words.
Gonna steal that one !
lol
Anyone see the gold smack down at 8:30?
$1617 to $1593 in a matter of minutes. Smack down algo in play, but by whom?
Perfectly explained away because the "markets" had "great" retail sales "news" "report." Must. Smack. Down. Gold. Silver.
I call liquidity event in the making.
Tell me more, please. There is always selling more paper, without the precious, into the market, or margin calls. I looked up liquidity event and don't have enough experience on board to surmise what you mean.
The Central Banksters have to slap down their fiat enemy.
In the mean time anyone look at food prices lately? Just skyrocketing at the store.
A can of fish when from $2.20 to $2.75. Milk has gone up. Wait until Christmas. You ain't seen nothing yet.
Bernanke and his fellow banksters will continue to boast about low inflation, even with oil over $100 barrele.
I-Pods are still the same price William Dudley, although they have no nutritional value.
Amusing.
This "victim" mentality ("and always, always, use the passive voice: once again - it can never be insinuated that someone was behind the screw up.") meaning Knight was a victim of its own software, which of course is entirely the product of humans (the term "computer error" excuses us from us) rather than a victim of its own policies and procedures, not to mention management, extends to the very basic core of our collective victim mentality.
How often do we use the following term during the day. "(Fill in the blank) made me do (fill in the blank)." Short of a gun to head (and I might argue even then that we are not compelled to "do" anything) no one makes me "do" anything.
No one makes me angry, sad, glad, happy, upset, take that job, go to that college, take out that loan etc etc. These are all preprogrammed victim/slave mentality phrases along the same lines as "you can't fight city hall".
Welcome to the Slave Nation. Freedom begins within, including understanding how the oppressor's language already has captured us.
Time to wake up Neo and reclaim your own personal sovereignty.
I make it a point to push thoughts like that out of my head...especially on the emotional side. Like " you piss me off", well no they don't. I only get pissed off because I allow myself to. When I keep that sort of attitude in check I can keep a clear head in most any situation. Oncce you allow somebody or something to trigger you emotions they own you.
Hard lesson learned repeatedly over the years...
"Once you allow somebody or something to trigger you emotions they own you."
I like to call it renting space in my head......free of charge naturally.
Of course..........in order to rid myself of these thoughts I must become personally accountable for EVERYTHING that I do and say. That doesn't make for a very good slave. However, it DOES make for a powerful (and extremely dangerous) individual in the eyes of the controllers and manipulators.
One (wo)man cannot change the world. But one idea can.
"People only do what you let them do" --- i-dog
CD - Who are you? I see your comments day in and day out and they are priceless. Thank you for this public service. You write some pretty funny shit too, but this one is a topper in the thinking catagory.
"CD - Who are you?"
Just some rouge HFT algo having some fun poking at myself and any others who wish to tag along for the ride.
Thank you for the high praise. I have not submitted a new ZH contributor article in many moons (several in the works but I never seem to finish anything lately) but you might like to look over some of my older stuff.
I am not an original thinker by any stretch of the imagination. But I try to use a different approach to describe ancient issues. How many times have we read or heard the same thing dozens of times. Then, suddenly, it all clicks. Often this was because we are finally ready to hear it.
For me, it usually pops up on my personal radar because a description or explanation is phrased differently. I'm just looking to create lots of cognitive clicks out there, beginning with my ID.
http://www.zerohedge.com/blogs/cognitive-dissonance
"Often this was because we are finally ready to hear it." Yep...looking at myself in the mirrow. Sometime in 2007/2008 was my day to begin the new conscience and start the listening process.
I will have a look at your posts. Thanks.
Bingo CD-
"IF we knew how our software works, and IF we had well defined and established and manageable processes in place to govern the implementation and execution of our trading platform, then we would have easily prevented this.... ergo, we don't; and therefore we couldn't"
How'd I do..?
Oh...I think I just fell a little bit in lust.
I suppose we should be thankful they do not handle air traffic control.
what? they took a brand new overly elaborate and complex algo, hooked it up to the matrix, then went for coffee and trusted that it would all go to plan. i don't see any problem with that. [/sarc]
....well, that would really depend upon which airport you have in mind....
Sounds like someone prank called them from the FED.
Someone on this thread has to say it:
Glitchez, Bitchez!
Perfect!
Who could have foreseen the predictable?
Clearly no one!
You certainly have been on a roll, lately.
-cue- music
Putting on the Glitch
http://www.youtube.com/watch?v=BAZhHXsknd8
"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?"
Now THAT is completely friggin hilarious. But Tyler, wouldn't that be gubberment intervention and manipulation? It doesn't happen in the gold and silver markets so how can it happen in stocks? I am confused.
...according to two people briefed on the matter...
... according to the people, who spoke anonymously..
...because the firm hasn’t commented publicly on what caused the error...
Knight Blames Trading Fiasco On "Dormant Program" Glitchthis is simply disinfo in a big headline
what is actually happening is that knight is practicing its lies for the litigation and getting its witnesses prepared for the frosting on the stockholders', er... bagholders' asses
nice disinfo job tho, BiCheZ!
Ok, so like you have this apprentice wizard, see and they want that a broom draws water, only it doesn't stop drawing water, it just keeps coming. So the apprentice wizard chops up the broom into a thousand pieces. So what you get all of a sudden is a thousand brooms that get up and all start drawing water unstoppably.
If only there was a real wizard to rescue us all from the mess the apprentice made. Ben wants us to believe...
Ok, so like, you have this big wizard, see, and they went from being the grey to the white after fighting with the Balrog. Plus they also smoke the herb. Hope that helps.
Smoking herb helps in a lot of situations, just not ones requiring a snap judgement. :>D
Disney, right?
HA HA HA
It is like blaming gravity for the airplane crash and ignoring the fact that the right wing fell off.
The right wing would not have fallen off except for a gravity glitch.
Where is that Mary Schapiro dude?
They sent her to get donuts, as she usually does.
I don't keep my dormant programs on the production server. They are removed and kept on the development server. Pretty basic stuff.
Unless they are saying that the dormant program was accidently distributed and then activated?
Bullshit.
"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."
Early after the Knight crash (late in the day, early the next morning) I was reading here and there that Knight placed "new" code online to counteract some new code the NYSE had implemented to try and pull in more trading volume for the NYSE. I haven't read a single thing about this angle since.
I wonder if we are seeing the new battle field between the two remaining "exchanges" and the various dark pools.
Shite Capital. The turd in the punch bowl that refused to leave. Equities for the wrong run. Where the fucking fuck are the adults?
None. Nada. Zip. We are all alone. We always were.
Vell, whose vatching the store?
Blame it on some poor schlep that grabbed the wrong box of cards and fed them into the card reader, pushed start, and went to watch porn on their computer...
Dormant code my @SS!
Who can blame the schlep - that ASCII porn's hot ;-)
We may as well as believe the Tooth Fairy
Every software program is put through the wringer.
Similar to Art Cashin's story then:
http://www.zerohedge.com/news/art-cashin-wall-streets-eras-error
from a pit trader... HAHA AHAHAHHA AHAHAHAHAHAHAHAHAHAHAHAHAHAH HAHAHAHA AHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAH
HAAAAAAAAAAA.........................................GO BROKE NY, HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA
Bob Pastrami on CNBC reporting that Knight is "making a comeback" and isn't it amazing.
He said first couple of weeks of August Kinight had 2% to 3% of the S&P 500 trading share, but that by August 9th-10th Kinight had returned to 10% of the S&P 500 trading share.
10%? Tell me that Knight isn't being girded by the TBTF and the FED.
"The Big Board’s so-called retail liquidity program, designed to attract smaller investors by giving them superior prices, was being implemented that day."
If "retail liquidity" in the same sentence with "smaller investors/superior prices" coming from Knight aren't the oxymorons of the year I don't know what are.
The amazing rescue of Knight by TPTB to continue their "market making" is a bigger story than this "glitch"; if they aren't part of the same plan.
'luring individual traders'
Sounds like a trap to me!
If you don't listen to Ann Barnhardt on this, you don't deserve ears.
I feel all tingly and bullish.
That's Cod3 for "We outsourced our soft\/\/4r3 devel0pm3nt to a 3rd w3rld [0u|\|try"...
So your basically saying, "Knight didn't build that software?" Who do you think you are, the obaminator?
All I have to say is...
010100110111010101100011011010110111001100100000011101000110
11110010000001100010011001010010000001111001011011110111010100100001
01001100 01000001 01010111 01001100
Gigantic market losses from running a mindless, berserk HFT algorithm isn't enough punishment.
Let's throw them in jail for using HFT. Because using an HFT is tantamount to stealing. And it's "unfair". Our socialist masterminds should hamper the market to make it more "fair".
Let's also write propaganda denouncing HFT here too and all us zerohedge folks can +1 each other:
When an algo decides to "flash crash" and misprices a stock at a low value of $X, people are evilly tricked into subjectively valuing the stock they have at less than $X, resulting in a sale that's practically coerced. Only trades occuring over a time of 50 ms are truly voluntary, anything faster is "unfree".
Using a computer to assist you with trades is like illegal doping in the Olympics. Also, HFT's don't really add liquidity, so they shouldn't be allowed to join in trades. Only people who bring liquidity should be allowed in a free market.
Basically, HFT's are to blame for all the woes in the world. Unlike people who profit as their reward for speeding the market to equilibrium, any profit gained by algos is stolen from the "exploited" people who voluntarily trade with it.
I'm perfectly fine with HFT's eating themselves into oblivian. Have at it.
No one ever listens to the Austrians. But von Mises wrote presciently in 1925, "There is no means of avoiding the bust caused by entrepeneurial homunculi performing automated market exchanges at superhuman speeds. The alternative is whether the bust occurs now, or later as a final and total enslavement of humanity by the electronic progeny involved."
Sound economic thinking proves that HFT's must be banned from the free market.
Even they insinuate "dormant code", the real culprit is till "humans, monkeys, Mary Schapiro, and knight executives who don't know what they are doing"
I'm guessing it was originally a program for downloading as much porn as possible as quickly as possible, then a bit of new code sent it out into the market like a drunken sailor with a fistful of cash into a whorehouse.
Due to a few typos in the above report, everyone here has been mislead (yet once again)....this was actually a program code named 'Doormat' created in Israel (by the same team that brought us Stuxnet) and paid for by Goldman.
The Doormat Program's purpose was to lure the muppets back into the market for another shearing. Doormat's initial launch took place during the initial trading in FaceBook. It was labeled a stunning success.
Nice. Muppets are great to wipe your feet on, all soft and dry...