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Knight CEO Comments On Algo Failure Which Has Cost Him 70% Of His Market Cap In One Day

Tyler Durden's picture





 

Here are the choice highlights from the interview with Knight CEO Tom Joyce, who is
inexplicably on Bloomberg TV without any clear point, purpose or spin,
and nothing to tell anyone and restore confidence.

  • TECHNOLOGY BREAKS. WHAT HAPPENS NEXT IS HOW YOU ESCALATE IT. WE'RE PROUD OF THE FACT THAT WE ESCALATED TO IT DIRECTLY TO OUR CLIENTS AND GOT THEM OUT OF HARM'S WAY. THERE ARE TWO THINGS WE TAKE GREAT PRIDE IN WHICH IS OUR CLIENTS' FOCUS AND OUR CULTURE WHICH IS INVOLVED WITH COMPLIANCE. WE HAVE A CULTURE OF COMPLIANCE AND CLIENT FOCUS AND WE ASSERTED BOTH OF THOSE THINGS YESTERDAY.
  • IF YOU GET INVOLVED IN THE DAY TO TAKE MINUTIA, THIS WILL GIVE YOU A HEADACHE OCCASIONALLY
  • IT DOES AFFECT THOSE WHO MIGHT LOOK TO BUY KNIGHT CAPITAL STOCK. WOULD YOU BE INTERESTED IN BUYING SHARES OF A COMPANY THAT WITHIN -- WITHIN A DAY OR TWO COULD GET WIPED OUT?
  • OF COURSE NOT, THIS IS AN ANOMALY. YOU CANNOT KEEP PEOPLE FROM DOING STUPID THINGS WHETHER IT IS WRITING IN PERFECT CODA BUYING THE WRONG SOFTWARE AT THE WRONG TIME. THAT IS WHAT HAPPENS WHEN YOU HAVE A CULTURE OF RISK.
  • YOU STAY AWAY FROM THE DAY- TO-DAY MINUTIA AND LOOK FOR THE LONG TERM, AS AN EQUITY INVESTOR, IT WILL WORK OUT.
  • WE'RE OPEN FOR BUSINESS. WE GOT RID OF THE BAD TRADES AND FREE UP A LOT OF CAPITAL. WE HAVE EXCESS CAPITAL RIGHT NOW.
  • JOYCE SAYS 'WE ARE OPEN FOR BUSINES,' 'WE'RE REASONABLY BUSY'

And the kicker:

  • WE NEED TO DO A BETTER JOB ON OUR TESTING ENVIRONMENT.

Translation: we are shopping ourselves right now and unless someone pick us up by end of trading when the margin calls come in, tomorrow's open may be a little problematic. Of course, JPM will mysteriously step up in the last minute and provide a DIP-like loan in the process onboarding all the "segregated" accounts.

  • KNIGHT BONDS FALL 13.125 CENTS TO 70 CENTS ON DOLLAR

Quite soon we may find out what it means to trade in a market which has just lost one of its key market makers, responsible for up to 15% of overall liquidity.

 


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Thu, 08/02/2012 - 10:19 | Link to Comment GMan_
GMan_'s picture

REvenge is a dish best served cold NITE.

Thu, 08/02/2012 - 10:29 | Link to Comment dow2000
dow2000's picture

That's it, I fucking quit this market, I'm out!

Thu, 08/02/2012 - 10:46 | Link to Comment BaBaBouy
BaBaBouy's picture

Casino NYSE... eTITANIC In Waiting ???

How Long before This Split-Nanosecond-Algo iPOD eTRADING collapses Whats Left of the Markets ?

 

Thu, 08/02/2012 - 10:58 | Link to Comment Bananamerican
Bananamerican's picture

"WE'RE PROUD OF THE FACT THAT WE ESCALATED TO IT DIRECTLY TO OUR CLIENTS..."

Joycean slip? What does that even fucking mean??

Will "Re-Joycing" come along to replace "Corzined" on ZH?

Gotta love that "CULTURE OF RISK."....motherfuckers...

Thu, 08/02/2012 - 11:06 | Link to Comment glenlloyd
glenlloyd's picture

Everything he said was garbage....it's just words that mean nothing.

Thu, 08/02/2012 - 11:23 | Link to Comment overbet
overbet's picture

Selling KCG 2.5 puts expire in 2 weeks with 350% vol free $

Thu, 08/02/2012 - 14:02 | Link to Comment OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

wow, are they brass and the size of grapefruits? That's some stones you got there pardner...

Thu, 08/02/2012 - 11:06 | Link to Comment monkeyboy
monkeyboy's picture

CEO Knight will still be good to collect his payout & bonus, right?

Thu, 08/02/2012 - 11:32 | Link to Comment Carl Spackler
Carl Spackler's picture

On the CEO comp...I HOPE not, AND we desperately need a regulatory CHANGE on HFT policy.

Good NITE, Irene !

Thu, 08/02/2012 - 12:09 | Link to Comment The Big Ching-aso
The Big Ching-aso's picture

 

 

The next fiscal year-end Knight Board meeting......................

"So it's near unanimous.  The Board hereby approves Tom's full bonus for 2012.    Frank?"

"Let the record show I withheld consent because of 70% market loss due to incompetence."

"Everyone else disagrees with you, Frank.  Tom did an outstanding job.  It could've been 90%."

"Point well taken."

 

Thu, 08/02/2012 - 10:29 | Link to Comment Pladizow
Pladizow's picture

Hal meet Joshua!

Thu, 08/02/2012 - 15:55 | Link to Comment Simulacra10
Simulacra10's picture

Awesome way to work in War Games :)

Thu, 08/02/2012 - 10:31 | Link to Comment Muppet of the U...
Muppet of the Universe's picture

Knight Capital recently purchased the futures accounts from Penson International, after Penson Clearing joined forces with Peak6 to create Apex Clearing.  Penson, an 11 cent stock lol, is now a subsidiary of Apex.

But here's where it gets interesting.  Penson's clearing of futures accounts covers well over 10 online brokers.

Now that Knight Capital is the clearing agent for these futures accounts, what happens to all of the futures accounts for these 10+ online brokerages, including popular ones such as ToS...

If Knight goes bankrupt, after their recent debocle with the FB IPO bungling and countless lawsuits aimed at them, including a 350 million dollar one by UBS, and now the 400+ million losses from yesterday, does rehypothecation play a role?

What happens to these futures accounts?  will they be rehypo'd to JM Morgan? 

What will happen to the futures market if a forced liquidation occurs?

 

Thu, 08/02/2012 - 10:32 | Link to Comment fonzannoon
fonzannoon's picture

It will go up?

Thu, 08/02/2012 - 11:23 | Link to Comment Nadaclue
Nadaclue's picture

Yes, the balloon has definitely gone up. These financial markets will continue to be a slow motion train wreck, until it's not and goes virtually all at once.

 

Thu, 08/02/2012 - 10:34 | Link to Comment bdc63
bdc63's picture

so this is what a black swan looks like ... hmmm .. I had something entirely different pictured ....

Thu, 08/02/2012 - 10:44 | Link to Comment Muppet of the U...
Muppet of the Universe's picture

I'm seriously really fuckin scared right now.  I'm short the Big Dow with practically everything XD

Thu, 08/02/2012 - 12:01 | Link to Comment fiftybagger
fiftybagger's picture

Betting the house's chips to get more of the house's chips? What will you do when the house goes bust?

Silver For The People

http://www.brotherjohnf.com/

http://www.brotherjohnf.com/forum/

http://www.youtube.com/user/BrotherJohnF

 

Thu, 08/02/2012 - 12:23 | Link to Comment The Big Ching-aso
The Big Ching-aso's picture

 

 

I hope it wasn't like a Fuxtnet virus.

Thu, 08/02/2012 - 15:49 | Link to Comment Matt
Matt's picture

Is this a black swan? I mean, really, after the 2010 Flash Crash, wasn't this more like an inevitability than an unexpected or improbable event? 

Thu, 08/02/2012 - 11:12 | Link to Comment disabledvet
disabledvet's picture

More like a dragon.

Thu, 08/02/2012 - 12:33 | Link to Comment CrazyCooter
CrazyCooter's picture

A wise mind once said "never assume malice where incompetence will suffice" ... however, I think the malice angle could have a lot of merit in this case.

Were they hacked and someone got ahold of their code, tweaked it, and blew them up? Maybe. Was it on purpose, to scuttle the ship so to speak? Maybe. Was it genuninely a mistake, made it past all the gate keepers, testers, and overseers IN THEIR PRODUCTION ENVIRONMENT when EVERY TRADER OUT THERE watching these symbols saw this freak out go minute after minute and did nothing because they didn't know? Mabye.

Seriously?

How a firm could lose 70% of its market cap (this isn't the total volume of trades, just the losses) NOT NOTICE this volume of activity!?!? So, that means, any of their traders, at any time, could have just bought the whole fucking Dow and went to lunch while their orders filled? Serously?

There is a lot more to this story, as we will find out in the coming months...

Regards,

Cooter

Thu, 08/02/2012 - 14:34 | Link to Comment Overflow-admin
Overflow-admin's picture

I just can't add anything morea accurate at the time.

Maybe a resumé? CRIMESCENE.

Thu, 08/02/2012 - 10:44 | Link to Comment malikai
malikai's picture

You can count on it.

IIRC Apex also picked up that dogshit racetrack bond and it's losses in that deal. So add another what, $30 mil? Just to set the stage.

Edit: All it took to send PNSN to purgatory was that $30mil and a few other losses elsewhere.

Thu, 08/02/2012 - 10:46 | Link to Comment Muppet of the U...
Muppet of the Universe's picture

holy shit, are you sure they didn't have any other major losses? For instance maybe bad debt after 2008 crash?

Thu, 08/02/2012 - 10:53 | Link to Comment malikai
malikai's picture

PNSN didn't have much exposure to CDOs and the rest of that, instead they failed in risk management as well as general management/board stupidity. Bog standard stuff really. What really got them was the losses in Canada on some other shady deal I can't remember and then finally the Racetrack bond. It was tiny compared to their "funding", which of course included client money, but that doesn't matter.

Thu, 08/02/2012 - 10:43 | Link to Comment SilverRhino
SilverRhino's picture

At this point in the game if you are stupid enough to still be trading and you see shit like this?  GTFO and perform the only true segregation of your funds from the companies in question.   CASH OUT & Bank of Sealy.

 

Thu, 08/02/2012 - 11:02 | Link to Comment FeralSerf
FeralSerf's picture

Did you just buy a new mattress?  There was an unmarked white van in front of your house removing the old one.

Thu, 08/02/2012 - 22:38 | Link to Comment Buck Johnson
Buck Johnson's picture

They have been using those customer accounts.  Do any of you remember them talking about that it's not illegal for the funds to use segregated accounts, just unethical.  As I said before why would Knight by Penson for 5 million?  It wanted and/or needed the 411 million in segregated accounts it had.  We are in a slow trainwreck.

Thu, 08/02/2012 - 10:32 | Link to Comment bdc63
bdc63's picture

It's just a flesh wound

Thu, 08/02/2012 - 12:04 | Link to Comment LeonardoFibonacci
LeonardoFibonacci's picture

Couldn't have happen to a much better deserving bunch of thieves.  With audited statements from the accounting firm of Dewey, Screwem & Howe.

Thu, 08/02/2012 - 10:20 | Link to Comment redpill
redpill's picture

Ships break, icebergs happen.  We're taking on water but we haven't sunk yet and the band is playing.  We just need to test our hulls better in the future.

Thu, 08/02/2012 - 10:33 | Link to Comment sodbuster
sodbuster's picture

And re-arrange the deck chairs!

Thu, 08/02/2012 - 10:39 | Link to Comment malikai
malikai's picture

Sir, would you like to say anything to the hundreds of people jumping overboard into the icy water?

Thu, 08/02/2012 - 10:43 | Link to Comment Turin Turambar
Turin Turambar's picture

Pull the fat lady off of the flotsam.  2 skinny people can be saved instead. ;-)

Thu, 08/02/2012 - 10:20 | Link to Comment slyhill
slyhill's picture

This would be a brilliant attempt at taking the company private. But I think that is giving them too much credit...

Thu, 08/02/2012 - 10:21 | Link to Comment DeadFred
DeadFred's picture

Nothing has happened here that a good number of puts and releasing the flash-crash algos won't take care of.

Thu, 08/02/2012 - 10:33 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

We've managed to reduce headcount in IT, which should give us an end-of-quarter boost.

Thu, 08/02/2012 - 10:21 | Link to Comment malikai
malikai's picture

As I said.

Deploy the Squid, prepare the Morgue.

Thu, 08/02/2012 - 11:16 | Link to Comment disabledvet
disabledvet's picture

Same platform apparently...so certainly they could do it. "Motive, means and opportunity" problem again.

Thu, 08/02/2012 - 10:21 | Link to Comment Captain Benny
Captain Benny's picture

Translation:  They haven't a clue where the bug originated or the triggering factors.

Thu, 08/02/2012 - 11:37 | Link to Comment Carl Spackler
Carl Spackler's picture

Winner, winner, chicken dinner!

Captain Benny, you are the contest winner!

("Tell me what I won, Johnny...Well we have a beautiful package of NITE call options for you with a strike at $12.50/share.  Fun at parties.")

Thu, 08/02/2012 - 12:58 | Link to Comment cougar_w
cougar_w's picture

They know what happened, but the fucking MBA CEO wouldn't be the one talking about it.

They probably already know everything. It's been 24 hours, they know everything. What nobody can explain is why the broken trades went out for 30 minutes. It would take less than 30 seconds to gracefully shutdown a bad market making engine, assuming one did not simply pull the network cables off the front.

Nobody was at the wheel, is why it went on. I wonder if their entire IT team is outsourced.

Thu, 08/02/2012 - 14:39 | Link to Comment Overflow-admin
Overflow-admin's picture

Even if it was outsourced, it doesn't explain why there wasn't anybody or any TRIGGER (see the programming definition) to shut down the beast. Instead, me thinks, many, many triggers must have been disabled for this to happen. Take all the tapes as EVIDENCE and compare the database STORED PROCEDURES and TRIGGERS for your CONCLUSIONS.

That was a free IT advice.

Thu, 08/02/2012 - 10:21 | Link to Comment Cult_of_Reason
Cult_of_Reason's picture

Headline reading algos are taking over the market again after this headline:

IMF says Fed should consider further securities purchases, especially MBS

Thu, 08/02/2012 - 10:21 | Link to Comment Race Car Driver
Race Car Driver's picture

Glitchez, bitchez.

Thu, 08/02/2012 - 10:22 | Link to Comment PicassoInActions
PicassoInActions's picture

i can provide a help with more testing ( over 15 yeas expirience ) with their clients money.

Thu, 08/02/2012 - 10:32 | Link to Comment JohnG
JohnG's picture

 

 

Someone should tell the idiot that real code is tested into existence.  Only a certified fool would write code without first writing the tests.  THIS is how errors are prevented.

Thu, 08/02/2012 - 13:01 | Link to Comment cougar_w
cougar_w's picture

I write code for a living. I've written some really complicated things but probably nothing close to what these guys are running. I don't think you can actually test code this complex. And since that is the case, they should not have access to anyone's money, and should have no Federal backups or bailouts.

Thu, 08/02/2012 - 18:59 | Link to Comment ExpendableOne
ExpendableOne's picture

Hopefully the people who wrote it did not also do the testing.  Also, is it possible that someone was watching how this code performed?  Perhaps someone noted a pattern and took advantage of it....

Thu, 08/02/2012 - 19:08 | Link to Comment ExpendableOne
ExpendableOne's picture

..duplicate...  Should have had someone else test and click save...

Thu, 08/02/2012 - 10:22 | Link to Comment Savvy
Savvy's picture

The milk is sour, but that's okay 'cause the fridge is still running.

Thu, 08/02/2012 - 10:48 | Link to Comment TheCanadianAustrian
TheCanadianAustrian's picture

We acknowledge that our bondholders have become very sick from eating our meat, and for that we are sorry. However, we view our meat as a long-term investment, and our 10-year view of our meat freshness remains bullish.

Thu, 08/02/2012 - 10:23 | Link to Comment bigwavedave
bigwavedave's picture

I think they are still LONG wizzard software (WZE). 

Thu, 08/02/2012 - 10:23 | Link to Comment Manthong
Manthong's picture

"GOT THEM (Clients) OUT OF HARM'S WAY"

That's a fact. right?

Thu, 08/02/2012 - 10:25 | Link to Comment Getting Old Sucks
Getting Old Sucks's picture

JOYCE SAYS 'WE ARE OPEN FOR BUSINES,' 'WE'RE REASONABLY BUSY'

Yup.  Trying to talk clients out of closing their accounts.

Thu, 08/02/2012 - 10:35 | Link to Comment lizzy36
lizzy36's picture

While everyone on the floor is busy posting to LNKD profiles "looking for challenges".

Thu, 08/02/2012 - 11:18 | Link to Comment disabledvet
disabledvet's picture

challenges...AWAIT.

Thu, 08/02/2012 - 10:24 | Link to Comment lizzy36
lizzy36's picture

Horrific PR advice.

If Knight hasn't "sold" itself by the close tomorrow, it will be forced to declare bankruptcy by Monday.

Btw, this is what a "culture of risk" is supossed to produce:consequences. Winners & Losers NOT bailouts.

Thu, 08/02/2012 - 10:31 | Link to Comment MsCreant
MsCreant's picture

That is almost puzzling, isn't it? Consequence for failure. Hmmm....(I did say almost. Man I have been around here a long time).

Thu, 08/02/2012 - 10:37 | Link to Comment fuu
fuu's picture

Grats on your third year!

Thu, 08/02/2012 - 10:44 | Link to Comment MsCreant
MsCreant's picture

Danka!

Thu, 08/02/2012 - 11:20 | Link to Comment disabledvet
disabledvet's picture

And yet Seeking Alpha commetarians told the only author allowed to write on this MEGA story that "he was full of shit for talking bankruptcy"...JUST YESTERDAY. Silly me for ripping into those phucking idiots. YESTERDAY AS WELL.

Thu, 08/02/2012 - 10:25 | Link to Comment toady
toady's picture

People who do not understand technology should refrain from using it, especially when large amounts of money are at stake.

Then again, if it's other peoples money, sure, why not?

Thu, 08/02/2012 - 10:33 | Link to Comment Getting Old Sucks
Getting Old Sucks's picture

Looking at the video of that software in action, set up properly, might make a super market manipulator.  Shouldn't the SEC examine that? 

Thu, 08/02/2012 - 12:17 | Link to Comment Bananamerican
Bananamerican's picture

zzzzzzzzzzzzzzzzzzzz

Thu, 08/02/2012 - 13:05 | Link to Comment cougar_w
cougar_w's picture

If the software was called "Tranny Midget Porn" the SEC would be all over it.

Thu, 08/02/2012 - 10:25 | Link to Comment the not so migh...
the not so mighty maximiza's picture

Hey at least it wasn't 90% market cap..right...bullsih

 

Thu, 08/02/2012 - 10:26 | Link to Comment Cone of Uncertainty
Cone of Uncertainty's picture

Live by the sword, die by the sword, you commie ass licking, stawk price manipulating bitch ass smegma eating bastard vermin douchetards.

 

Thu, 08/02/2012 - 10:45 | Link to Comment MsCreant
MsCreant's picture

You did the smegma thing yesterday. Kinda cheesy. 

Thu, 08/02/2012 - 11:01 | Link to Comment Cone of Uncertainty
Cone of Uncertainty's picture

One person on ZH likes smegma.

Thu, 08/02/2012 - 10:26 | Link to Comment JohnnyBriefcase
JohnnyBriefcase's picture

This makes me giddy like a schoolgirl. I love it when the manipulators get fucked.

Thu, 08/02/2012 - 10:34 | Link to Comment MsCreant
MsCreant's picture

Don't mean to be a wet blanket, but don't bank on it.

Thu, 08/02/2012 - 10:59 | Link to Comment JohnnyBriefcase
JohnnyBriefcase's picture

I know. A guy can dream though.

Thu, 08/02/2012 - 11:52 | Link to Comment Saro
Saro's picture

Knight:  "I haven't been fucked like that since grade school!"

Thu, 08/02/2012 - 10:27 | Link to Comment gdogus erectus
gdogus erectus's picture

We haven't figured out who torpedoed us or why but we plugged the hole, are listing slightly but come aboard!

Thu, 08/02/2012 - 10:27 | Link to Comment DeFeralCat
DeFeralCat's picture

I had an order chewed this morning and I am told that Knight is one of the three possible offenders.

Thu, 08/02/2012 - 10:28 | Link to Comment babylon15
babylon15's picture

This is good news all around.  One, the system did work.  A private company made private trades and took private losses.  The customers were not affected at all, and enormous arbitrage opportunities were created for the rest of the market.

 

Overall, working as intended.  I think Knight will recover.

Thu, 08/02/2012 - 13:07 | Link to Comment cougar_w
cougar_w's picture

Insane. Or being sarcastic.

Thu, 08/02/2012 - 10:28 | Link to Comment Everybodys All ...
Everybodys All American's picture

Hey we lost 440 million yesterday alone but hey everything is cool. We'll get some chump to fund us so we can do this again. Maybe he should ask Obama how he's re-funding MF Global customers.

Thu, 08/02/2012 - 10:29 | Link to Comment Itch
Itch's picture

"WE'RE PROUD OF THE FACT THAT WE ESCALATED TO IT DIRECTLY TO OUR CLIENTS AND GOT THEM OUT OF HARM'S WAY."

If their technology can do that by accident, imagine what it can do to them on purpose...like completely fleecing the sweet fuck out of them. Any one trading stocks has whats comming to them; no sympathy, you all DESERVE it.

Thu, 08/02/2012 - 11:24 | Link to Comment disabledvet
disabledvet's picture

Funniest thin I've heard all year. And trust me "Goldman is escalating" as I write!

Thu, 08/02/2012 - 10:31 | Link to Comment buzzsaw99
buzzsaw99's picture

day to day minutia? no he didn't say that. no. he. didn't.

Thu, 08/02/2012 - 10:35 | Link to Comment MsCreant
MsCreant's picture

The way these CEOs claim ignorance, you would think it is all minutia to them...

Thu, 08/02/2012 - 12:06 | Link to Comment toady
toady's picture

Rule #1, Don't sweat the little shit.

Rule #2, It's all little shit.

Thu, 08/02/2012 - 13:12 | Link to Comment cougar_w
cougar_w's picture

The guy is an MBA. An idiot in wing-tips. Probably couldn't tell you what a market making algo is or what it does if his life depended on it.

The team that writes his software probably works out of Hungary. The team that manages the network is in India. Nobody knows who's on first base, ever. It's a 24x7 circus.

Technology run amok. Now ... burn fuckers.

Thu, 08/02/2012 - 10:39 | Link to Comment Unprepared
Unprepared's picture

Yep, coming from a Market Maker, Liquidity Providing Algo shop, day to day looks nothing like minutia.

 

Or maybe he meant day to day militia.

Thu, 08/02/2012 - 10:30 | Link to Comment dvsteenk
dvsteenk's picture

the first US manufactured stupid Black Swan?

i found it extremely hard to believe that they don't have any real-time trading balance tracking, and no global system shut-down triggered by losses bigger than a set threshold level

it's called a stop-loss, the oldest tool in the book, they don't have it!?

how big are the odds, this is a HFT company?

this smells fishy

Thu, 08/02/2012 - 10:47 | Link to Comment Unprepared
Unprepared's picture

Yes they do have a stop loss trigger, it just has mysteriously been commented out in the code.

Thu, 08/02/2012 - 10:57 | Link to Comment dvsteenk
dvsteenk's picture

maybe the stop-loss was disabled when the screensaver got activated

Thu, 08/02/2012 - 13:16 | Link to Comment cougar_w
cougar_w's picture

Guys. Stop loss? Are you kidding me? That's what reversing a trade is about.

They go nuts ... and then if it works out take any winnings, otherwise they get the exchange to reverse any losses.

Thu, 08/02/2012 - 15:01 | Link to Comment Overflow-admin
Overflow-admin's picture

 19      DROP TRIGGER <trigger_name>;
 20      commit;

Thu, 08/02/2012 - 10:31 | Link to Comment ian807
ian807's picture

I test software for a living. I can tell you that incidents of this type are essentially unpreventable and will continue to happen. What you have is an entire ecology of thousands of different software trading programs, each interacting with each other. Emergent properties and behaviors can't be prevented in any meaningful sense in a system that complex. The very best you can do is to turn off trading when trades go beyond certain parameters.

Thu, 08/02/2012 - 11:10 | Link to Comment Cthonic
Cthonic's picture

Yes, human (software engineering) errors will continue to happen, including being blindsided by unexpected behaviors.  However, this incident was immanently preventable and easily mitigated.  Epic fail trifecta for their IT professionals, operations oversight, and risk control.

http://www.nanex.net/aqck2/3522/20120801.eEXC.09.46.19.180_1ms.0.gif

Thu, 08/02/2012 - 11:26 | Link to Comment disabledvet
disabledvet's picture

REALLY? ....sounds risky. What'd ya say we have a beer after "they blow up the world"!

Thu, 08/02/2012 - 13:23 | Link to Comment TraderTimm
TraderTimm's picture

I can't believe that Knight didn't have any kind of capital controls in place. If I was running an automatic algorithm of any kind, not only would I make sure that my inputs were what I expected, with measures to prevent any kind of out-of-bounds behavior to be mitigated (exchange feed passes me a value I wasn't expecting/can't operate on) I'd make sure the MONEY I was using was in an account that was firewalled from everything else.

Even if these guys didn't have something like:

 

function capitalCheck(){ // Updates every 'n' interval

    if(workingCapital < lowerLimit)

    {

        Debug.Log("**** WARNING - BELOW CAPITAL LIMIT, TERMINATING ****");

        activeTrades("flat"); // Bail out of initiated trades

        terminateAlgo(true); // Kill trade initiating algo

    }

}

They should've had something looking at their drawdown/burnrate/whatever... It's just unexcusable they didn't have a clue, and even if they DID, that they took so goddamned long to stop it.

 

Thu, 08/02/2012 - 15:08 | Link to Comment Overflow-admin
Overflow-admin's picture

drop function capitalCheck; /*and that's where things get interesting*/
commit;

Thu, 08/02/2012 - 10:31 | Link to Comment Brother Sebastian
Brother Sebastian's picture

Knight's fortune cookie:  "Man who eats many prunes get good run for money."

Thu, 08/02/2012 - 10:33 | Link to Comment buzzsaw99
buzzsaw99's picture

man who fart in church sit in pew

Thu, 08/02/2012 - 10:41 | Link to Comment Monedas
Monedas's picture

A fart is nothing more than anal software !

Thu, 08/02/2012 - 13:24 | Link to Comment Miss Expectations
Miss Expectations's picture

That wasn't chicken.

Thu, 08/02/2012 - 13:37 | Link to Comment RichardP
RichardP's picture

Vaporware.

Thu, 08/02/2012 - 13:41 | Link to Comment RichardP
RichardP's picture

A fart is nothing more than anal software!

Vaporware.

Edit:  I replied to Monedas and my comment was placed here.  Strange.

Thu, 08/02/2012 - 10:32 | Link to Comment Clowns on Acid
Clowns on Acid's picture

Actually I think Joyce did the right thing. Get out in front of it, admit itr was technology fuck up, and tell the market that we are open for buisness.

What else are you going to do...? Besides raise a little extra capital to replac that 440 MM that flew out the window yesterday.

 

Thu, 08/02/2012 - 10:37 | Link to Comment bdc63
bdc63's picture

See, the way I see it is that you wait until you get that "deer in the headlights" look off of your face before you "get out infront of it" on live TV ... just sayin ...

Thu, 08/02/2012 - 10:40 | Link to Comment LoneStarHog
LoneStarHog's picture

It is unfortunate that some Clowns on Acid don't understand the difference between technology and man-made algos. But then, he is hoping that the majority of his audience - that is IDIOTS still in these corrupt markets - will believe his BULLSHIT!

Thu, 08/02/2012 - 10:54 | Link to Comment Getting Old Sucks
Getting Old Sucks's picture

Whatever happened to just jumping out the window?  Sheesh!

Thu, 08/02/2012 - 11:28 | Link to Comment disabledvet
disabledvet's picture

But the media...in order to...and then...because... :0!

Thu, 08/02/2012 - 10:36 | Link to Comment Monedas
Monedas's picture

Monedas walks away from a promising Badminton career .... in solidarity with Knight CEO  Tom Joyce !             MonedaS        1929          Comedy Jihad Oh The Humanity Moment

Thu, 08/02/2012 - 10:37 | Link to Comment ebworthen
ebworthen's picture

"YOU STAY AWAY FROM THE DAY- TO-DAY MINUTIA AND LOOK FOR THE LONG TERM, AS AN EQUITY INVESTOR, IT WILL WORK OUT."

I can't believe he uttered the "long term equity investor" line.

Really Tom?  Is that why the S&P is where it was in 1999!?!

Long term investor?!?!  When the only market left is HFT churn and burn?!?!

Good God Almighty!

Thu, 08/02/2012 - 10:37 | Link to Comment Rick64
Rick64's picture

Sharks are running out of fish and are eating smaller sharks.

Thu, 08/02/2012 - 12:38 | Link to Comment CrazyCooter
CrazyCooter's picture

Best comment in this thread!

Regards,

Cooter

Thu, 08/02/2012 - 10:38 | Link to Comment Vet4RonPaul
Vet4RonPaul's picture

ZH article after article provides weekly, if not daily, evidence that the machine/system has become too complex for those that maintain it to control it any longer.  Everything from the whale in london, to natwest upgrades that didn't work, to the utter nonsense going on in the EU, US and China is more than sufficient for me to conclude that they have lost control of the machine.  I'm into gold and silver physical essentially because they are not represented (to me at least) as electronic bytes.  I've posted for months that simple sql update statements can make these money bytes vanish - either all at once or little by little.  And when it does, good luck proving your case when you have next to no evidence that the money bytes existed in the first place.  The best arguement against this seems to be 'yeah, but everyone else relies on money bytes too so if they vanish we're all screwed'.

Thu, 08/02/2012 - 12:43 | Link to Comment malek
malek's picture

Bemoaning overcomplexity and then chastising simple SQL statements? That's a good one!

Thu, 08/02/2012 - 13:45 | Link to Comment RichardP
RichardP's picture

Do you seriously think his point was about SQL statements?  Or was his point about how simple can screw up complex?

Thu, 08/02/2012 - 16:23 | Link to Comment Vet4RonPaul
Vet4RonPaul's picture

Thanks Richard.  Indeed I was trying to make the point that some systems/machines can get to point of complexity where they can no longer be controlled or predicted, even by their masters, designers and experts.  I think there is abundant evidence to conclude that our global financial systems are in such a state now and that neither tinkering or over-hauling can fix them.  I think they will collapse and self destruct under their own weight and complexity.  I have moved my assets to physical gold, silver and land because I think they have a slightly better chance of not going missing in the middle of the night than electronic representations of money.  I may lose 20% but I doubt I'll lose 100%.

 

 

 

 

 

 

 

Thu, 08/02/2012 - 16:30 | Link to Comment malek
malek's picture

I totally agree, but on your view what constitutes overcomplexity and what is needed complexity you should reconsider me thinks. You know, throwing out baby with bathwater danger.

Thu, 08/02/2012 - 16:31 | Link to Comment malek
malek's picture

RichardP, that is news??

If one wants to reduce overcomplexity, he should come up with valid examples of where to cut and which needs to remain. SQL is the perfect example of KISS, and that's IMHO the main reason it is still in use decades later. For screw-ups you have backups.

Thu, 08/02/2012 - 17:11 | Link to Comment Freegold
Freegold's picture

Our money is mostly digital credit and they are real as long as credibility is there. If credibility is lost on a large enough scale they are fictious. If you don´t own tangible wealth like gold, silver, land etc you might wake up one day and realise it was all a mirage.

Thu, 08/02/2012 - 10:39 | Link to Comment pods
pods's picture

All they got to do is reverse the "buy" and "sell" in one line of code and they are Goldman, no?

pods

Thu, 08/02/2012 - 10:40 | Link to Comment virgilcaine
virgilcaine's picture

Massive Bank run on Futures trading accounts anyone!  Your Money is safe with us.. really it is.

Thu, 08/02/2012 - 11:11 | Link to Comment Monedas
Monedas's picture

Developing World English:     Your money are safe with us !

Thu, 08/02/2012 - 10:41 | Link to Comment PMakoi
PMakoi's picture

Maybe Tom Joyce is simply auditioning for work?  CEO available, will work for $$millions, plus expenses, Benz, and house in the Hamptons.

 

Thu, 08/02/2012 - 10:44 | Link to Comment alien-IQ
alien-IQ's picture

after a brief morning spike, KCG now looks ready to go completely off the rails. Touched a new low moments ago (excluding pre market prices).

Thu, 08/02/2012 - 10:54 | Link to Comment Race Car Driver
Race Car Driver's picture

Mbbe it'll take some of the sell pressure off of FaceBerg.

Thu, 08/02/2012 - 11:16 | Link to Comment alien-IQ
alien-IQ's picture

not likely. I'm waiting for FB to hit my buy price...$1. that's when I'll spring for 500 shares.

Thu, 08/02/2012 - 10:46 | Link to Comment Catullus
Catullus's picture

Are you fucking kidding me? The board should fire the guy tonight.

Next time light yourself on fire.

Economics degree from Harvard College 1977. Head global trading at ML from dec 2001 to may 2002.

Thu, 08/02/2012 - 10:43 | Link to Comment bdc63
bdc63's picture

Good thing this was a "machine" problem and not a "human" problem or somebody's bonus might have been in BIG trouble ...

Thu, 08/02/2012 - 10:45 | Link to Comment Stuck on Zero
Stuck on Zero's picture

What happens when there is only one trader left in the market?

 

Thu, 08/02/2012 - 11:12 | Link to Comment optimator
optimator's picture

It would be the FED and they'd own everything -- that's the goal.

Thu, 08/02/2012 - 10:46 | Link to Comment ThunderingTurd
ThunderingTurd's picture

Jim Cramer just said, "Most of America has contempt for Wall Street and he shares that contempt."  Hey Jim, you are included in that group.  Jim Cramer is the biggest hypocrite on the boob tube.

Thu, 08/02/2012 - 11:03 | Link to Comment Race Car Driver
Race Car Driver's picture

Go out and buy the ugliest dog you can find. Take it home and then complain about how ugly it is.

 

TeeVee watchers make no sense.

Thu, 08/02/2012 - 11:11 | Link to Comment optimator
optimator's picture

If Cramer ever had twins he'd name them Pump and Dump.

Thu, 08/02/2012 - 10:47 | Link to Comment zrussell
zrussell's picture

One blackjack table closed. Plenty more ready for you! Place your bets!

Thu, 08/02/2012 - 10:51 | Link to Comment FieldingMellish
FieldingMellish's picture

They had a problem with the hidden cameras... all fixed now.

Thu, 08/02/2012 - 10:52 | Link to Comment Downtoolong
Downtoolong's picture

inexplicably on Bloomberg TV without any clear point, purpose or spin,and nothing to tell anyone and restore confidence.

I guess the best he can do to try and stabilize their stock price, is simply show everyone that he hasn't commit suicide, yet.

Thu, 08/02/2012 - 11:01 | Link to Comment Monedas
Monedas's picture

Piers Morgan propaganda technique alert:     He asks the snarkiest liberal questions as set ups for black athletes to wax magnanimous !           Monedas         1929         Comedy Jihad Alert Level High

Thu, 08/02/2012 - 10:54 | Link to Comment Count de Money
Count de Money's picture

The algos are still at it. EXPD flash crashed this morning. Went from around $35 down to $31.72 and back up again in minutes.

Thu, 08/02/2012 - 10:55 | Link to Comment Downtoolong
Downtoolong's picture

Quite soon we may find out what it means to trade in a market which has just lost one of its key market makers, responsible for up to 15% of overall liquidity.

Yep, once you cut through the glaringly obvious BS, this is just another event in a greater process of Wall Street imploding on itself.

Thu, 08/02/2012 - 11:05 | Link to Comment dvsteenk
dvsteenk's picture

and how much of that 15% consists of flinging the same lot of 100 shares thousands of times back and forth between two virtual trading programmes that are operating on a single source machine

Thu, 08/02/2012 - 11:06 | Link to Comment ptoemmes
ptoemmes's picture

 

 

  • TIS BUT A FLESH WOUND.
Thu, 08/02/2012 - 11:06 | Link to Comment disabledvet
disabledvet's picture

And a win for the Bulgarian Media as well. "of course the market is off because of the ECB! KNIGHT TRADING HAS NOTHING TO DO WITH IT!"

Thu, 08/02/2012 - 11:07 | Link to Comment ChacoFunFact
ChacoFunFact's picture

risk has two components, probability and consequence.  separately, didn't they announce not too long ago they went self-clearing?

Thu, 08/02/2012 - 11:12 | Link to Comment DeFeralCat
DeFeralCat's picture

Bear sighting.. Is it a grizzly?

Thu, 08/02/2012 - 11:13 | Link to Comment ThisIsBob
ThisIsBob's picture

Fuck these plantywaist code writing technoiogy exploiters.  May they all be hoist on their own petards.

They are not traders, they are thieves and the exchanges let them go on thieving because they are the only customers.

Thu, 08/02/2012 - 11:37 | Link to Comment buzzsaw99
buzzsaw99's picture

some of the human market makers who quit complained that the only time an order filled was if they made a mistake. how fitting that knight should fall by the same sword.

Thu, 08/02/2012 - 11:16 | Link to Comment chinaboy
chinaboy's picture

It's not testing, itsd stupidity. Nasdaq tested for a month only to discover fatal mistake after online. Knight was a lot better, it discovered that testing is needed after losing $400 million(They pride themselves for that).

Thu, 08/02/2012 - 11:20 | Link to Comment mendigo
mendigo's picture

The computer age has brought with it a new paradigm: A company can introduce a product that is defective, completely non-functional and even deadly. But if they can blame it on software it is likely there will be no repercussions. That and if someone developes a smiley face that you click on to open your email then they (apple) wants to patent it.

In some industries that are woefully backward (honest and responsible) they would have back-up systems watching the primary. But this is more a pull the trigger and see where it lands kind of thing like the military - will likely only kill a couple dozen heathens.

There's no money in "honest" work. I would think they would be developing algos to fuck with other algos and suck them dry - that would be cool.

Thu, 08/02/2012 - 11:23 | Link to Comment Jake88
Jake88's picture

WE NEED TO DO A BETTER JOB ON OUR TESTING ENVIRONMENT Yeah just about 400 million dollars worth better.

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