How one bad algorithm cost traders $440m • The Register
Makes my occasional bloopers (a few scrambled file systems, a few junk documents, a few dozen rouge emails) seem very modest in comparison!As one observer put it: "Do that 40 times a second, 2,400 times a minute, and you now have a system that’s very efficient at burning money"
Yeah, but it's nothing compared with deliberate actions (selling junk debt as investment grade) that led to burning of billions during the GFC.
any chance anonymous was involved here? this looks like the sort of thing they'd love to do.
I doubt they would have the nous to pull something like this off. If they did get into a system like that and take it over they would more than likely just bring it down.Originally Posted by Elkvis
If, lets say, they did have the ability to profit from such an action, the way you collect the proceeds would be in no way anonymous (no pun intended) and you'd have the CIA or FBI kicking in your door before you could spend any of it.
If they did it to bring down the institution and had no way to get proceeds from it, they have just enriched other financial institutions by their actions (a sale under value still benefits someone). Hardly an action you could be proud of if you had that mindset.
I'd go with a plain old snafu that was able to go way beyond its usual parameters. Just another story from the financial world that would have been unthinkable five years ago.
They could just have intended the involved party to loose...and not profit themselves, though.
Yeah, but every penny lost by this city trader is gained by another (on the other side of the transaction). If you wanted a city trader to lose $440m, there's another way to look at it to say that they were enriching other traders by $440m.
Enemy of your Enemy ....
It's fascinating to see how much is at stake with computerized stock trading.
I recently read an IEEE article on "high frequency trading" - this article gives an interesting glimpse into digital trading. In this technological race, even a few km of extra line length (adding transaction delays of milliseconds) will make or break the success of traders. The Microsecond Market.
Thats some risky business - How long do these algorithms remain in test?? You would want to nail that down to the nth degree haha, just let it loose on the market and see? nah! A guy that graduated from my university in financials sits in UAE somewhere running macros picking triangular abritrage out across forex markets = free money for the very short periods it exists - dont know how well he is doing from it.
@Matticus - liked the article
Last edited by rogster001; 08-03-2012 at 03:01 PM.
Thought for the day:FLTK: "The most fun you can have with your clothes on.""Are you sure your sanity chip is fully screwed in sir?" (Kryten)
Stroustrup:
"If I had thought of it and had some marketing sense every computer and just about any gadget would have had a little 'C++ Inside' sticker on it'"
I just read up on what triangular arbitrage is. very interesting stuff. only milliseconds to make the deal though, and potentially significant costs if you fail.
yes its crazy - The weird thing is its like it obeys a physical law, the market naturally comes back into balance with no intervention, economics in general has been strongly linked with that kind of behaviour, the prof that was highlighting this stuff was a real heavyweight, could have made a fortune himself I suppose but over beers said he chose to live a nice life without the trader pressure, he was a really good communicator of "a potentially dry subject" - as he put it, It was one of his top students that moved to UAE and started playing the game. - We had a course to make money on the forex futures market, a nominal 200k, and follow your trades, qualify why you made them, marks awarded for profit - taken away for loss! The whole module pass was that, no exam nada, we got logins to the Chicago Mercantile Exchange and that was it..go figure! was ace, I got top mark and made a clear 50k - no chance would want to try it for real tho haha, beginners luck is all i can say! Was fascinating stuff though.
Last edited by rogster001; 08-03-2012 at 03:30 PM.
Thought for the day:FLTK: "The most fun you can have with your clothes on.""Are you sure your sanity chip is fully screwed in sir?" (Kryten)
Stroustrup:
"If I had thought of it and had some marketing sense every computer and just about any gadget would have had a little 'C++ Inside' sticker on it'"
When I wrote share trading software it was for an ISO 9001 certified company. It took me 3 hours to correct a spelling mistake, 5 minutes to change the code and 2:55 to get the change through the fanatical build engineer and into QAT.
This reminds me of a Japanese trading platform that lacked UI validation (around 2004). A trader at release wanted to sell 1 share of a very valuable stock (~100,000 YEN) but mixed up the input and ended up selling ~100,000 shares for 1 YEN...
"Man alone suffers so excruciatingly in the world that he was compelled to invent laughter."
Friedrich Nietzsche
"I spent a lot of my money on booze, birds and fast cars......the rest I squandered."
George Best
"If you are going through hell....keep going."
Winston Churchill
This kind of thing should have...and probably was caught in QA. Someone knew about this bug be it dev, QA or PM. They probably pushed it through anyways to hit their deadline. I cannot buy that no one knew this bug existed.
I have had code fail in production, due to envronmental differences, data inconsistencies and even temperature/vibration issues, so I can understand.
But....
This code ran 40'ish times a second and no one noticed the issue for 45 minutes (over 100,000 executions).
How did new software software run over 100,000 times, burning US$10 mill per minute, without anyone noticing and turning it off?
"Man alone suffers so excruciatingly in the world that he was compelled to invent laughter."
Friedrich Nietzsche
"I spent a lot of my money on booze, birds and fast cars......the rest I squandered."
George Best
"If you are going through hell....keep going."
Winston Churchill
