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How to lose $172,222 a second for 45 minutes

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Re: How to lose $172,222 a second for 45 minutes

#81

Post by koliber »

Narkov wrote: post #12

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" ?

In a big long-running error like this it is extremely unlikely that a company would have come out on top.

However, it happened fairly regularly that smaller trading errors would cause a couple (or tens of) thousand dollar win or loss for the client. If it was a loss, the client universally complains and gets comped by the company. If it was a win and it is found, the client keeps mum and the company does not raise the issue.

Re: How to lose $172,222 a second for 45 minutes

#84

Post by telephonetemp »

clearly wrote: post #82
telephonetemp wrote: post #70

I assumed they had redundant servers with consensus algorithms in place in finance but apparently they don't. Would it be impractical?

Yes- latency is a big issue for this type of trading system.

Perhaps you could do consensus checking retrospectively? I.e., out of N supposedly identical servers a random one gets to make any given decision in real time but then a separate system goes back and compares all servers' results and stops their operation if there's divergence?

Re: How to lose $172,222 a second for 45 minutes

#85

Post by 6d0debc071 »

sirsar wrote: post #4

I'm shocked they didn't have a killswitch or automated stop-loss of some kind. A script that says "We just lost $5M in a few minutes; maybe there's a problem." Or, a guy paid minimum wage to watch the balance, with a button on his desk. $172,222 is a lot of minimum-wage years.

This was the bit that most shocked me:

"Knight did not retest the Power Peg code after moving the cumulative quantity function to determine whether Power Peg would still function correctly if called."

From thereon they purely and simply deserved everything that happened to them.

Re: How to lose $172,222 a second for 45 minutes

#86

Post by paganel »

MBCook wrote: post #7
sirsar wrote: post #4

I'm shocked they didn't have a killswitch or automated stop-loss of some kind. A script that says "We just lost $5M in a few minutes; maybe there's a problem." Or, a guy paid minimum wage to watch the balance, with a button on his desk. $172,222 is a lot of minimum-wage years.

How many millions in orders do they normally process per minute? Since there were no procedures in place, would you like to be the guy who pulled the plug on the (let's guess) $100 million/minute processing system? Do you think you could get another job after that? What would the costs be for violating contracts? You could single handedly sink the company (which, in the end, this issue basically did). I don't blame t…

> running a shadow copy

Honest question, it's that really doable at this scale?

Re: How to lose $172,222 a second for 45 minutes

#87

Post by scrrr »

High Frequency Trading seems so abstract. There's no value created, it seems. It's like something in between imperfect systems, scraping off the margin created by that imperfection. It's fascinating, and interesting from an algorithmic point of view (like a computer game), but at the same time I don't feel sympathy for this company going out of business.

Re: How to lose $172,222 a second for 45 minutes

#88

Post by JonnieCache »

ycombobreaker wrote: post #51
meepmorp wrote: post #26

Earlier quoted context omitted.

I seem to have misread, but not in a way that markedly distorts things.

"Powder Keg" is a very marked distortion of "Power Peg".

In the context of this story though, it's very apposite. I did the same thing. Quite disappointed after I read it correctly.

Re: How to lose $172,222 a second for 45 minutes

#89

Post by marincounty »

sirsar wrote: post #4

I'm shocked they didn't have a killswitch or automated stop-loss of some kind. A script that says "We just lost $5M in a few minutes; maybe there's a problem." Or, a guy paid minimum wage to watch the balance, with a button on his desk. $172,222 is a lot of minimum-wage years.

Yea--few live people looking at the monitor? I don't understand anyone who completly trusts technology.
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