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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

#211

Post by crbnw00ts »

harryh wrote: post #186
jonknee wrote: post #185

Earlier quoted context omitted.

No, it's more like they want to buy a kagillion shares and before they can complete the trade a HFT buys them and sells to Norway for slightly more. It's not good for me, I sold to the HFT. It's just intraday noise that only does the HFT any good.

If that was actually happening it would mean that spreads (the difference between where market makers buy and sell stocks) were large. In fact, the exact opposite is true. Spreads are tiny. Much smaller than they used to be! This is because there's not just one HFT. There are tons. So if one of them tries to do this you won't sell to them, you'll sell to one of the other ones for a better price. Yay competition!

Exactly. Competition among all the HFT entities has squeezed a lot of the volatility out of the market:

"Volatility, a measure of the extent to which a share’s price jumps around, is about half what it was a few years ago."

Quoted from here:

http://www.businessweek.com/articles/2013-06-06/how-the-robo...

Although I wish I could find a better article / source with more info and some hard data to back that up. That sentence is not nearly as compelling as it could be if it had more details.

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

#212

Post by mcguire »

crusso wrote: post #157
fhars wrote: post #129

Earlier quoted context omitted.

Looking at systems by considering whether they 'create value' in some generalized utilitarian sense is unproductive. Such systems survive by being able to extract energy somehow A perfect description of many forms of organized crime.

I would draw a line between systems that rely upon voluntary interaction like stock markets vs systems that rely upon forced coercion like organized crime.

Most forms of organized crime are purely voluntary.

The "forced coercion" typically only comes into play if someone fails to hold up their end of a contract---criminal organizations cannot sue.

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

#213

Post by snake_plissken »

sumedh wrote: post #117
vecter wrote: post #92

Earlier quoted context omitted.

I really hate to go down this road because it's been rehashed thousands of times on Hacker News, but high frequency traders add value to the market by adding liquidity (and therefore reducing spreads --> cost to you for executing) and price discovery.

This liquidity argument is rehashed thousand times but did you know that most of the orders made by HFT's end up getting cancelled. Regulators found HFT's exacerbated price declines. As noted above, regulators found that high frequency traders exacerbated price declines. Regulators determined that high frequency traders sold aggressively to eliminate their positions and withdrew from the markets in the face of uncert…

>that most of the orders made by HFT's end up getting cancelled.

Thank you. That is all that needs to be said.

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

#214

Post by chollida1 »

adambratt wrote: post #9

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…

I dont' want to call your friend a liar, but this is most likely false.

> 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.

1) Dev and Trading/Sales happen at different physical locations.

2) I actually know someone who spent their day cleaning this up and according to someone who was on the tech team and working that day no one went home early.

Think about it, the firm just lost a shit load of money due to an IT issue. Dev's were frantically searching the code for the bug, Sys admins were rifling through server logs. No one had nothing to do:)

> After trading was halted they set the cap at 20% loss for rolling back trades. So if you lost 19% of your position in that short period of craziness, tough luck.

This is just plain false. The normal procedures for busting trades were followed. There was no 20% "cap" for losses, how would you even determine what a 20% loss is?

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

#215

Post by AsymetricCom »

mathattack wrote: post #169
hrjet wrote: post #111

Earlier quoted context omitted.

I heard similar stories from a friend working for a big telco. The other day he was describing a strange bug which was triggering in the field of a large telco. It was strange because it used to get triggered after exactly 85 days of deployment. It turned out to be a debug script that was pinging a development server and timing out (because the development server was not accessible from the field). The series of retr…

Legacy telcos are the epitome of large big institutions where many of the best talents leave. After just a few years of working with them, I couldn't believe they could get a dial tone. How did they produce so much great R&D?

wining and dining college grads and telling them all sorts of great stories then laying the workload on them until they burn out or quit.

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

#216

Post by adambratt »

chollida1 wrote: post #214
adambratt wrote: post #9

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…

I dont' want to call your friend a liar, but this is most likely false. > 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. 1) Dev and Trading/Sales happen at different physical locations. 2) I actually know someone who spent their day cleaning…

I really have no reason to doubt this guy as he's a pretty prolific trader. That said...traders are rather known for hyperbole.

Per the 20%, I forget what it was but I know trades were rolled back and there was some kind of threshold for them. When I first wrote this, 20% losses was what I remembered. There's an article on it somewhere with the actual amounts. I think it had to do with how far stop limits were off from the open price of the stock.

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

#218

Post by sgt101 »

boxy_brown wrote: post #149
Jtsummers wrote: post #142

Earlier quoted context omitted.

Having worked in the aerospace side of software dev, I'd actually be cool with this. Outside of software, real engineers have real liability when their systems fail [1]. PEs [2] are held accountable in most countries that license engineers when they sign off on things that should not have been signed off on. Too many people on the software side, even in safety critical systems, play fast and loose with the "engineeri…

You are missing an important point: different systems fail in very different ways. The reason why people will generally prefer software over other ways of building things is because the cost of failure is often very low. No one is going to die if a website serves an incorrect image, nor will such a bug require billions of dollars worth of semiconductor inventory to be recalled to repair. If every software project was…

Sometimes this is true, but it misses some things.

Sometimes the cost of failure appears low, but is actually massive because the failure mode is not understood. For example a spreadsheet that miscalculates and causes a bad investment decision and a corporate failure.

Software is often chosen because it trades off against weight (in physical systems) or people (more commonly).

Software is fundamentally different because it is not commonly toleranced or the tolerancing of software is not understood. Reliability in physical engineering is understood in terms of the limits to which a component can be pushed. This concept seems not to be applicable to software.

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

#219

Post by frankc »

sitkack wrote: post #207

Dead code takes down another system. A perfect storm of failures that they made themselves. My gut feeling is that most trading firms could suffer a similar loss. Having worked for a 3rd party accounting management firm that kept logs for smaller traders I really realized how borked the whole system is. 60s era pen and paper stuff moving at the speed of light. > Sadly, the primary cause was found to be a piece of sof…

Actually, I would characterize this as the removal of dead code that brought down the system, which is basically the opposite.

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

#220

Post by HillRat »

protomyth wrote: post #168

"During the deployment of the new code, however, one of Knight’s technicians did not copy the new code to one of the eight SMARS computer servers. Knight did not have a second technician review this deployment and no one at Knight realized that the Power Peg code had not been removed from the eighth server, nor the new RLP code added. Knight had no written procedures that required such a review." That is just painful…

Look up the 1999 WorldCom outage due to a screwed-up load of Lucent's Jade platform upgrade. Fun times. Best I can say about that is that within a year WCOM execs had bigger problems than just pissing off CBOT....
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