An algorithmic trading software bug is being blamed for a day of wild swings at the New York Stock Exchange – and has resulted in the trader placing the dodgy orders reporting a $US440 million pre-tax loss.
What’s been called a “mini flash crash” by Forbes saw 150 NYSE-traded stocks, from General Electric down to minnows, subject to wild swings before things were brought under control. Knight Capital, the firm fingered for the glitch, responded by telling its customers to use other traders – and has since reported the loss as a result of the Wednesday, August 1 software problem.
With a huge chunk of its value wiped out by the glitch, Forbes now says the cost of the bug is roughly equivalent to Knight Capital’s entire market capitalization.
Reuters states that the only comment to come from the company is a terse statement that “a technology issue occurred in Knight's market-making unit related to the routing of shares of approximately 150 stocks to the NYSE”.
The Reuters report suggests that timing may have been the problem: the orders may have been intended to be filled during the trading day, but instead were filed in the opening minutes of trading.
The latest trading disaster follows the 2010 "Flash Crash", in which a single bad order triggered a thankfully-temporary trillion-dollar market crash; and the embarrassing crashes that plagued the Facebook IPO, preventing the stock from plunging anywhere as quickly as it probably should have on listing. ®