Wall Street’s Big Banks Are Waging a Technological Arms Race
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Re: Wall Street’s Big Banks Are Waging a Technological Arms Race
#2I highly recommend Rana Faroohar's book 'makers and takers' to add some perspective to this insanity...
https://www.amazon.com/Makers-Takers-Finance-American-Busine...
Re: Wall Street’s Big Banks Are Waging a Technological Arms Race
#3> Bam. Bam. Bam. Dummy trade signals that were supposed to stay within the company’s electronic systems broke loose and slammed into computers at the New York Stock Exchange’s options markets. So many orders crashed through that by 8:44 a.m., safeguards within Goldman Sachs sprang into action, severing the connection between the company and the exchanges.
Anyone whose built a trading system lives with this type of fear on a daily basis.
Write your risk system first and your algo second.
> The cause? A coder had mistakenly programmed a router to send placeholder bids as live orders. If not for the good graces of the options exchanges, the bank would have lost $500 million, according to the U.S. Securities and Exchange Commission. Cancellations and price adjustments reduced that to $38 million
And this is at the top of my things that are unfair in the markets. Knight Capital wasn't bailed out by the exchanges for the same thing and it bankrupted them. Goldman with its alumni every where.... was.
Re: Wall Street’s Big Banks Are Waging a Technological Arms Race
#4> Bam. Bam. Bam. Dummy trade signals that were supposed to stay within the company’s electronic systems broke loose and slammed into computers at the New York Stock Exchange’s options markets. So many orders crashed through that by 8:44 a.m., safeguards within Goldman Sachs sprang into action, severing the connection between the company and the exchanges. Anyone whose built a trading system lives with this type of fe…
Yeah I really don't understand why Goldman should get a pass like this. They fucked up, they should lose money. Or better yet, errors like this should be reversed or safeguarded against better.
Re: Wall Street’s Big Banks Are Waging a Technological Arms Race
#5> Bam. Bam. Bam. Dummy trade signals that were supposed to stay within the company’s electronic systems broke loose and slammed into computers at the New York Stock Exchange’s options markets. So many orders crashed through that by 8:44 a.m., safeguards within Goldman Sachs sprang into action, severing the connection between the company and the exchanges. Anyone whose built a trading system lives with this type of fe…
That's a bit of a mischaracterization I think. Exchanges have well-defined rules for clearly erroneous executions, and these are not the same in the equities (Knight) and options (Goldman) markets. If anyone else had made the options trades that Goldman did that day, their trades would have been busted as well.
Re: Wall Street’s Big Banks Are Waging a Technological Arms Race
#6> Bam. Bam. Bam. Dummy trade signals that were supposed to stay within the company’s electronic systems broke loose and slammed into computers at the New York Stock Exchange’s options markets. So many orders crashed through that by 8:44 a.m., safeguards within Goldman Sachs sprang into action, severing the connection between the company and the exchanges. Anyone whose built a trading system lives with this type of fe…
That's a bit of a mischaracterization I think. Exchanges have well-defined rules for clearly erroneous executions, and these are not the same in the equities (Knight) and options (Goldman) markets. If anyone else had made the options trades that Goldman did that day, their trades would have been busted as well.
> Exchanges have well-defined rules for clearly erroneous executions,
I'd disagree with this statement.
it's true that each exchange does have its own rules and that they do set some guidelines but as far as I know they all have rule that state that they carry final veto power over what trade do and don't get broken.
For instance from Nasdaq
> Nasdaq is providing general guidance on when transactions may be deemed erroneous under Rule 11890. This guidance is not a mandate of the rule but is information on how Nasdaq generally applies the terms of the rule (at Nasdaq2019s discretion) to determine whether an execution is clearly erroneous.
Re: Wall Street’s Big Banks Are Waging a Technological Arms Race
#7> Bam. Bam. Bam. Dummy trade signals that were supposed to stay within the company’s electronic systems broke loose and slammed into computers at the New York Stock Exchange’s options markets. So many orders crashed through that by 8:44 a.m., safeguards within Goldman Sachs sprang into action, severing the connection between the company and the exchanges. Anyone whose built a trading system lives with this type of fe…
Yeah I really don't understand why Goldman should get a pass like this. They fucked up, they should lose money. Or better yet, errors like this should be reversed or safeguarded against better.
Honestly, this stuff just shows us how rigged the system is. This isn't the first time it has happened. Flash crashes caused by bad algorithms lost a bunch of money that was reversed as well. IMO, it is horrible to reverse this. They took the risk and got to keep the reward, but as soon as they fail, they get bailed out every single time.
Re: Wall Street’s Big Banks Are Waging a Technological Arms Race
#8> By the time the trades were blocked for the last time, less than an hour after they began, Goldman Sachs executed orders to sell more than 1.5 million options contracts for $1. The cause? A coder had mistakenly programmed a router to send placeholder bids as live orders. If not for the good graces of the options exchanges, the bank would have lost $500 million, according to the U.S. Securities and Exchange Commission. Cancellations and price adjustments reduced that to $38 million.
It sure does seem like there are two sets of rules on Wall Street. I doubt any small trader would be able to reduce their losses 90+% after errantly submitting a bunch of live options orders.
Re: Wall Street’s Big Banks Are Waging a Technological Arms Race
#9> By the time the trades were blocked for the last time, less than an hour after they began, Goldman Sachs executed orders to sell more than 1.5 million options contracts for $1. The cause? A coder had mistakenly programmed a router to send placeholder bids as live orders. If not for the good graces of the options exchanges, the bank would have lost $500 million, according to the U.S. Securities and Exchange Commissi…
Sorry, but rules need to scale. What is acceptable for a small trader can not always be acceptable for a massive Corp.
Re: Wall Street’s Big Banks Are Waging a Technological Arms Race
#10> By the time the trades were blocked for the last time, less than an hour after they began, Goldman Sachs executed orders to sell more than 1.5 million options contracts for $1. The cause? A coder had mistakenly programmed a router to send placeholder bids as live orders. If not for the good graces of the options exchanges, the bank would have lost $500 million, according to the U.S. Securities and Exchange Commissi…
Sorry, but rules need to scale. What is acceptable for a small trader can not always be acceptable for a massive Corp.
Your statement is backwards though. The massive corp is being granted much more leeway for acceptable behavior than that of a small trader.