51–60 of 243 posts
Earlier quoted context omitted.
It is peg, not keg. Peg refers to an order where the limit price is automatically adjusted to some benchmark. For instance, you always want to be 1 penny away from the best bid. I don't know specifically what "power peg" is, though.
I seem to have misread, but not in a way that markedly distorts things.
The week after this we had a trader in our office who had a meeting at Knight on the morning it happened. He said he saw the whole dev team just power off and go home at 11am, followed quickly by the rest of the employees. At that point, there was nothing they could do. The craziest thing is that it went on for so long. No one caught it until their own traders so it come across Bloomberg and CNBC. They actually thoug…
FYI, NYSE rolled back transactions based on predetermined price rules. There were no discretionary rollbacks associated with Knight's "big day".
> The only people that came out of this ahead were aggressive algos on the other side
Don't forget the other market makers; they took the other side of those Knight trades and made the spread every time Knight lost the spread.
Just another reminder of how systems that you'd think are rock solid often aren't. In my previous life working with telcos, I once tried to teach a particularly huge customer how to use CVS how to manage configurations across a 10+ machine cluster of machines. They didn't see any value in it, so they stuck to their good old process of SSHing into each machine individually, "cp config.xml config.xml.20131022", and the…
Out of interest, what would have been the outcome for Knight if their positions had caused them to be winners? $12m fine, keep the spoils and "carry on" ?
Earlier quoted context omitted.
Yes, these criminal masterminds found a way to swindle honest hard-working themselves out of 440 million dollars and "get away with" a cool extra -12 million.
They also amassed over $3 billion net short positions spread across 75 stocks during those 45 minutes causing significant losses to investors with stop loss positions triggered that would not have happened without Knight's erroneous trades. They didn't just harm themselves...
Earlier quoted context omitted.
It is peg, not keg. Peg refers to an order where the limit price is automatically adjusted to some benchmark. For instance, you always want to be 1 penny away from the best bid. I don't know specifically what "power peg" is, though.
I seem to have misread, but not in a way that markedly distorts things.
Don't humans also make similar large scale mistakes? Merill Lynch's infamous London whale comes to mind. Also. I could be wrong but aren't most of derivatives a zero sum game: don't I have to lose money on my puts for you to make money on your calls ? Didn't so many people lose money on securities because they misunderstood their exposure ? The Knight computer error was spectacular and catastrophic but us humans have…
Actually, we would both lose money if the stock price doesn't move. But yes, generally in order for a call or put to go up, the other must go down.
It's not zero sum, though. If you had purchased a 950 call and an 850 put just before Google announced earnings (with the stock around 900), the call would now be worth more than you paid for both options combined. The counterparty who sold the options is the one who loses (and it is zero sum with them, per design).
The week after this we had a trader in our office who had a meeting at Knight on the morning it happened. He said he saw the whole dev team just power off and go home at 11am, followed quickly by the rest of the employees. At that point, there was nothing they could do. The craziest thing is that it went on for so long. No one caught it until their own traders so it come across Bloomberg and CNBC. They actually thoug…
> After trading was halted they set the cap at 20% loss for rolling back trades. FYI, NYSE rolled back transactions based on predetermined price rules. There were no discretionary rollbacks associated with Knight's "big day". > The only people that came out of this ahead were aggressive algos on the other side Don't forget the other market makers; they took the other side of those Knight trades and made the spread ev…
Don't humans also make similar large scale mistakes? Merill Lynch's infamous London whale comes to mind. Also. I could be wrong but aren't most of derivatives a zero sum game: don't I have to lose money on my puts for you to make money on your calls ? Didn't so many people lose money on securities because they misunderstood their exposure ? The Knight computer error was spectacular and catastrophic but us humans have…