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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

#91

Post by Applejinx »

wastedhours wrote: post #78
hueving wrote: post #10

Earlier quoted context omitted.

Your statement is backwards though. The massive corp is being granted much more leeway for acceptable behavior than that of a small trader.

Not so much leeways as "huge company has a massive amount of context to use as evidence this was out of the ordinary". A smaller trader has proportionally less history in the market to use as a evidence something is wrong and the rollback rules should apply.

You're not contradicting the objection, you're just outlining another mechanic by which it happens.

"The New England Patriots reached ten Super Bowls, therefore the foot out of bounds just before scoring a touchdown was clearly a mistake and out of the ordinary. Therefore, award the Patriots the point, on the grounds that they usually don't make mistakes like that. And don't check the pressure in the football please, there have been ten Super Bowls where that wasn't apparently a problem…"

(I wonder who I'm insulting more, the Pats or Goldman Sachs :D )

Re: Wall Street’s Big Banks Are Waging a Technological Arms Race

#92

Post by wastedhours »

Applejinx wrote: post #91
wastedhours wrote: post #78

Earlier quoted context omitted.

Not so much leeways as "huge company has a massive amount of context to use as evidence this was out of the ordinary". A smaller trader has proportionally less history in the market to use as a evidence something is wrong and the rollback rules should apply.

You're not contradicting the objection, you're just outlining another mechanic by which it happens. "The New England Patriots reached ten Super Bowls, therefore the foot out of bounds just before scoring a touchdown was clearly a mistake and out of the ordinary. Therefore, award the Patriots the point, on the grounds that they usually don't make mistakes like that. And don't check the pressure in the football please,…

Loving the analogy :D but (and excuse my ignorance), but in NFL those rules don't allow that, where as it appears the markets do have these mechanisms to allow it?

Re: Wall Street’s Big Banks Are Waging a Technological Arms Race

#93

Post by TheCoelacanth »

matte_black wrote: post #18
jfoutz wrote: post #11

Earlier quoted context omitted.

Yes, and that's a good scaling rule. the person with $50 dollars is likely clueless and stumbling around trying to figure out what the rules are. The person with $50 billion can do serious damage when they screw up. The rules in place are exactly backwards. the $50 dollar team is held to a high standard, with no affordances. the $50 billion dollar team is part of the club, so enforcers look the other way when they sc…

It is not backwards at all. Corporations are made up of a ton of people, there's no one person you can lay blame on. Some guy fucks up and costs a firm half a bil with a computer error, that's not something you want to just allow to happen. A dude losing $50? Give me a break, his risk is his own. Consider his $50 a small price to pay for learning how things work. And let me remind you, it is a very small price.

If your corporation is operating in a way that one person's mistake can cause you to lose $500 million, that is your own damn fault.

Re: Wall Street’s Big Banks Are Waging a Technological Arms Race

#94

Post by grkvlt »

kilroy123 wrote: post #24
ransom1538 wrote: post #13

Earlier quoted context omitted.

Imagine coming back from lunch, you start to unwrap your sandwich at your desk. Then, your boss walks by and throws your sandwich across the room and explains while you were out your bug caused 440 million dollars of erroneous trades - and the company now no longer exists. https://dealbook.nytimes.com/2012/08/02/knight-capital-says-...

This is why I would never work on this type of software! I just don't have the nerve.

One of the scariest moments for me was when I wrote a poker playing bot back in ~2005 and placed most of my months salary in its trading account before switching it on. Even though I knew I had written money management routines, tested them, and the program did sensible funds allocation and risk-of-ruin calculations, it was still nerve wracking to think that an unnoticed coding error could have wiped out my earnings entirely. (Spoiler - it didn't, fortunately!)

Re: Wall Street’s Big Banks Are Waging a Technological Arms Race

#95

Post by audiometry »

grkvlt wrote: post #94
kilroy123 wrote: post #24

Earlier quoted context omitted.

This is why I would never work on this type of software! I just don't have the nerve.

One of the scariest moments for me was when I wrote a poker playing bot back in ~2005 and placed most of my months salary in its trading account before switching it on. Even though I knew I had written money management routines, tested them, and the program did sensible funds allocation and risk-of-ruin calculations, it was still nerve wracking to think that an unnoticed coding error could have wiped out my earnings…

did it make money?

how did it interface to the poker-playing site? was there an api, or were you masquerading as the client?

Re: Wall Street’s Big Banks Are Waging a Technological Arms Race

#96

Post by hueving »

wastedhours wrote: post #92
Applejinx wrote: post #91

Earlier quoted context omitted.

You're not contradicting the objection, you're just outlining another mechanic by which it happens. "The New England Patriots reached ten Super Bowls, therefore the foot out of bounds just before scoring a touchdown was clearly a mistake and out of the ordinary. Therefore, award the Patriots the point, on the grounds that they usually don't make mistakes like that. And don't check the pressure in the football please,…

Loving the analogy :D but (and excuse my ignorance), but in NFL those rules don't allow that, where as it appears the markets do have these mechanisms to allow it?

They do allow it, but that's precisely what people are complaining is unfair. They are literally too big to follow the same rules as the small traders.

Re: Wall Street’s Big Banks Are Waging a Technological Arms Race

#98

Post by mrchicity »

chollida1 wrote: post #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 fe…

Different situations so I doubt it has anything to do with GS nepotism.

Knight couldn’t cancel their bad trades because most weren’t clearly erroneous, based on exchange rules. If the market was bid 20.01 offered at 20.02, Knight’s test program was buying 20.02 and selling 20.01 over and over. Those prices weren’t far from the prevailing market, they just executed stupidly and very quickly.

Goldman was selling $10 options for $0.01, so they met the exchange rules for breaking erroneous trades since they were so far from fair value.

If I were an evil Machiavellian exchange, I’d much rather stick Goldman with a nasty error than Knight. At the end of the day, exchanges need transaction volume to make a profit. Goldman is an 800lb Gorilla with huge capital reserves and diverse business lines, so they’d still come back to trade after licking their wounds. Knight almost went bankrupt.

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