How To Lose $172,222 a Second For 45 Minutes 327
An anonymous reader writes "Investment firm Knight Capital made headlines in 2012 for losing over $400 million on the New York Stock Exchange because of problems with their algorithmic trading software. Now, the owner of a Python programming blog noticed the release of a detailed SEC report into exactly what went wrong (PDF). It shows how a botched update rollout combined with useless or nonexistent process guidelines cost the company over $172,000 a second for over 45 minutes. From the report: 'When Knight used the Power Peg code previously, as child orders were executed, a cumulative quantity function counted the number of shares of the parent order that had been executed. This feature instructed the code to stop routing child orders after the parent order had been filled completely. In 2003, Knight ceased using the Power Peg functionality. In 2005, Knight moved the tracking of cumulative shares function in the Power Peg code to an earlier point in the SMARS code sequence. 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. ... 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.'"
The efficiency of capitalism (Score:5, Funny)
See, the private sector can blow money faster than the public sector (OmabaCare site).
Re:The efficiency of capitalism (Score:5, Insightful)
Re:The efficiency of capitalism (Score:5, Insightful)
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I was responding to a comment that suggested this was a failure of the private sector. I responded that this is an example of what the private sector is supposed to be doing, and actually does quite well. When you talk about 1 company in the private sector losing money, this doesn't mean the private sector as a whole lost wealth (e.g. what happened here). When you talk about the public sector losing money, it almost always translates to lost wealth.
As a society we don't need to care what happens to some
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It is usually just wasted.
By your own previous logic, money can never be "wasted", just redistributed.
Every dollar that the government collects in taxes or creates out of thin air is redistributed back into the private sector.
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Re:The efficiency of capitalism (Score:4, Interesting)
As a society we don't need to care what happens to some random company.
If JP Morgan collapsed tonight, we (as a society) would certainly care about what happens.
Why? Because some "random companies" are so big that their troubles would shake the (inter)national economy.
This is a great strength of the private sector, and this property is what is referenced by the phrase "the market is self-regulating".
The market is not self regulating, unless it is self regulating towards oligopolies, oligopsonies, cartels, and general shittiness.
Greenspan Concedes Error on Regulation [nytimes.com]
October 23, 2008
But on Thursday, almost three years after stepping down as chairman of the Federal Reserve, a humbled Mr. Greenspan admitted that he had put too much faith in the self-correcting power of free markets and had failed to anticipate the self-destructive power of wanton mortgage lending.
"Those of us who have looked to the self-interest of lending institutions to protect shareholders equity, myself included, are in a state of shocked disbelief," he told the House Committee on Oversight and Government Reform.
On a day that brought more bad news about rising home foreclosures and slumping employment, Mr. Greenspan refused to accept blame for the crisis but acknowledged that his belief in deregulation had been shaken.
I could quote the entire article, hell his entire testimony. [scribd.com]
There was no room in his ideology for private companies to intentionally abandon risk management and externalize the risk by selling it off.
So despite his attempts to mince words, the results of his Ayn Randian ideology ended up being exactly what one would historically expect from not having meaningful regulation.
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The market is not self regulating, unless it is self regulating towards oligopolies, oligopsonies, cartels, and general shittiness.
The market wasn't the problem in the Greenspan case. It was easy lending by the federal reserve combined with really high leverage. The first is the fault of the Fed, the very group led by Greenspan. The second is the fault of federal regulators who let us note are part of the largest monopoly in the world and not subject to market forces.
So despite his attempts to mince words, the results of his Ayn Randian ideology ended up being exactly what one would historically expect from not having meaningful regulation.
I suppose that might be true, but why would one expect markets to instantly compensate for changes in government regulation?
There's also the problem of what would have
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If JP Morgan collapsed tonight, we (as a society) would certainly care about what happens. Why? Because some "random companies" are so big that their troubles would shake the (inter)national economy.
1. If our country is contingent upon a particular company to survive, then I don;t think it fits the definition of "some random company".
2. The reason we have companies like this is because they got preferential treatment (e.g. regulations that benefited them over their competitors, along with bailouts, etc)
3. There is no reason that we need to have a system with too big to fail companies, we just don't yet have the political will to remove corrupt and inept politicians who help foster the current environme
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It's like a Catholic catechism. No matter what data is presented, win loss or draw, it's evidence of how efficient the free market is. Well done.
Re:The efficiency of capitalism (Score:4, Insightful)
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You can start with Coase's theorem. It shows that when transaction costs are null, welfare is maximized. It is impossible for transaction costs to be null. The way law should be structured and government works is by reducing transaction costs, and make us cooperating.
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The corporations (and other moneyed interests) don't have to do any of that because it pays the government du jour to do its bidding. The whole idea of representative democracy is to prevent and minimize that by introducing checks on power by the public.
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Govt funding costs are essentially 0. China owns something like 15% of the US Debt. The Fed rebates interest on t-bills it buys. Conclusion: the national debt is a distraction, not a crisis except for those who want to gain political advantage by cynically drumming up fears about it when they know that once they get into power, they can run up the debt with impunity because "Reagan proved deficits don't matter."
$400 billion / year is "essentially zero"? (Score:4, Informative)
$400 billion per year in interest payments is "essentially zero"? That number is actually almost manageable, the BIG problem is that it's snowballing.
You'll recall Obama has been saying that if he wasn't allowed to borrow more, the government would default - wouldn't be able to pay the interest due. We're borrowing to the interest on our borrowing. That's when you know you're fucked, when you're maxing out one credit card to pay the minimum payment on another card. That's essentially what the US government is doing. We're in a trap the we're borrowing more and more in order to make the payments on existing debt, so the debt and the interest just keeps getting bigger and bigger until 100% of our tax money goes to pppay interest, leaving no money for essential government services.
Looking at what has happened in other countries, the "you're fucked" point, the point at which you can't escape the death spiral, is about 100% of GDP - when a country owes as much as it generates. Eight years ago, our debt to GDP ratio was about 35%. In 2014, it should hit 70%. That tells us we are about six to eight years from becoming Greece.
The difference between Greece and though, is that Greece is small enough to be bailed out. Nobody has $5 trillion to bail the US out.
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No. You're basically wrong on every point you bring up.
"Looking at what has happened in other countries, the "you're fucked" point, the point at which you can't escape the death spiral, is about 100% of GDP - when a country owes as much as it generates."
No, there is no magic debt/GDP limit: http://krugman.blogs.nytimes.com/2013/05/26/reinhart-and-rogoff-are-not-happy/ [nytimes.com]
"That tells us we are about six to eight years from becoming Greece."
No, Greece doesn't have its own currency, so we are in no way the same a
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The problem is that the federal reserve is specifically designed to siphon capital out of america, and also force the government to borrow to issue new money.
Banks have shares in the federal reserve, and those banks, even if they are foreign owned, are entitled to a statutory dividend.
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You didn't have to get a mortgage.
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Yes, technically he can just go homeless if he likes or he can pay rent to someone who has to buy fire insurance and pass the costs to him.
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Indeed, I always forget that I have the FREEDOM to be homeless, live under the stars with my wife and children, enjoy the nature, you know. Republican dream for working people.
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Combining nerdism with capitalism (Score:2, Informative)
Capitalism is very effective in what it does
Nerdism, on the other hand, is very detail in what it does
Combining both and you will get an invincible beast
Unfortunately (or fortunately, depending on how you look at it), the investment firm "Knight Capital" does not treasure the nerds enough to put them into position that can have effective oversee powers over technology deployment
I hope the 400 million loss will wake them up
No more we nerds should work under them capitalists --- they need us MUCH MORE than we
This is what I like best about /. (Score:5, Insightful)
Re:This is what I like best about /. (Score:5, Insightful)
Capitalism produces large corporations that are very efficient at doing dumb things.
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I'm too busy thinking about how many children with cancer could be saved for 400 million US dollars.
Re:This is what I like best about /. (Score:5, Insightful)
Re:This is what I like best about /. (Score:5, Funny)
Maybe they will donate it to children with cancer?
instant +5 Funny
private dumb: $20K. Govt dumb: $400 billion (Score:5, Interesting)
Two things. First, the free market does things efficiently, including dumb things. Microsoft built the Surface efficiently - $390 per tablet. Government spent over $1,000 each buying them.
Secondly, there's dumb, and there's government dumb.
A dumb corporation requires three people to do a job that one person could do. A government gets the same job done by creating a new agency which contracts with three companies at $320 million each, requires that it be done in Pascal, and prohibits any testing until the project is "complete", at which time it's six years after tube event that the project was created to handle.
I just saw one of our most efficient government agencies, one that wins efficiency awards, spend over $19,000 on a project I could do in two days. Funny thing is, I WORK for that agency, so it would have cost them almost nothing to have me do it.
Re:private dumb: $20K. Govt dumb: $400 billion (Score:5, Insightful)
And the reason your gov't is making an agency to do a contract to get something done isn't inefficiency, it's socialism. Seriously. It's make work projects to try and spread some money around because otherwise the natural tendency if for money to be hoarded at the top by a few wealthy oligarchs (we call 'em the 1% these days).
The US Postal Service has God like efficiency. Just ask Netflix. Or just mail a letter and watch it travel across the breath of the United States in less than a week for 33 1/3 cents. The Space programs were (and are) amazing, and did things private industry couldn't hope to accomplish and that we're still reaping the benefits from today. The Gov't can be plenty efficient when it wants to be. It can also be very inefficient when it wants to. There are times when that's a good thing.
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In many cases government inefficiency is caused by Congress. Congress funneling money to their districts, to their contributors, etc.
Just look at the difficulties when they were trying to close military bases. Congressmen always wanted to keep "their" base open.
The same thing with prohibitions on the government from using its size to negotiate contracts to its benefit (i.e. drive down the prices of drugs that it buys). These are inefficient transfers of public money to private industry mandated by Congre
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Companies that are run horribly inefficiently tend not to last too long
You've never worked for the Detroit car companies, I take it. My uncles who did think that Dilbert's PHB is a model of efficiency and generosity in comparison to what they had to deal with.
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Half the members of the US government are actively trying to sabotage it for ideological reasons, the budget drama being the latest example of this. That's a pretty large obstacle to effectiveness.
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The postal service is self-supporting, or at least it is supposed to be. There's some shenanigans going on with calculating liabilities like pensions, and their impact on service and subsidies needed.
Also, the postal service has a government enforced monopoly on first class mail. Fedex and UPS are prohibited from attempting to enter that arena even if they want to, so I'm not sure how we can even evaluate the postal service's vaunted efficiency. Packages are one area where there is overlap, and in that a
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Just because you have two different set of incentives that lead to different inefficiencies don't make them equal. It's hardly news that capitalism rewards cutting corners, anything that makes 99 managers look good and one fail utterly and catastrophically will happen because taking the slightly slower and safe road is punished as is hurts the department's bottom line while averted catastrophic risk is "invisible". The same translates down to employees, getting results here and now is rewarded over doing it
Re: This is what I like best about /. (Score:5, Funny)
There's no contradiction.
It took the government months to levy a 12 million dollar fine while the invisible hand of the free market gave a dumb corporation a 400 million dollar bitch slap in less than a hour.
Now that's efficiency!
Re: This is what I like best about /. (Score:5, Interesting)
You could argue that "the free market gave a dumb corporation a 400 million dollar bitch slap in less than a hour" is funny, but actually it,s insightful. It's the perfect example of how companies could and should be punished for doing stupid things.
And here's an even better example: the flash crash of three years ago. In a few minutes some algorithms went haywire and stock prices dropped dramatically, in some cases down to 1 cent. Clearly that was wrong. The free market fixed this issue in six minutes. That's pretty fast, if you ask me. The government is still, three years later, thinking about what to do about it. Really!?
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It's both ways.
Letting the market punish the screwups is part of the overall efficiency.
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In the same thread where I can find 1000 people going on about how efficient capitalism is I can find another (sometimes the same) 1000 people complaining all the dumb things their companies do. Well, which one is it? It doesn't work both ways people. Could it be that people are people, no matter what banner they're organized under?
I dispute your assertion that a market cannot both be efficient and have people complaining about it. /goodnight
Further, I believe lots of things can be dumb and efficient, like plants.
Re:This is what I like best about /. (Score:5, Insightful)
The public and private sector do different things better. While the private sector is more efficient in terms of service or widgets per hour, there's also heavy pressure to trick, mislead, and rip off consumers and customers.
Such "trick" pressure is noticeably lower in the public sector. There is relatively little pressure for a line worker and middle manager to rip off or trick customers because they don't have to compete with other cut-throat competition and are not sweating over narrow margins. They generally don't want the drama of customers sending or phoning complaints and so do an adequate job, even if a bit slow at it.
Certain kinds of services are better under one versus the other. If it's a service where it's easy to fool customers, especially over longer-term features, then it's probably best done by or heavily regulated by the gov't. If it's something that's relatively easy for a consumer to verify the quality of, then it's probably best done by the private sector.
Re:This is what I like best about /. (Score:5, Interesting)
The problem is starting a cooperative is about the same effort as starting a corporation, but the benefits to the founder are much lower. So more corporations are started than coops. Perhaps if someone can design an incentive scheme that can't be abused then more coops will be started and hopefully we'll have less ripping off going on.
Then again maybe coops are better behaved only because they self select for founders who are less greedy who then set a less greedy organization culture
Re:Combining nerdism with capitalism (Score:5, Insightful)
>> Capitalism is very effective in what it does
Pumping the money from the poor to the rich.
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In Latin America at least the reason that the poor are less poor is the rise of socialist and semi-socialist governments that have put tight controls on corporations and the very wealthy. The GNP of the countries of South America has almost tripled in the decade since the rise of 'socialismo' across the continent while the percentage of that rise going to the poor and middle class has (IIRC) quadrupled. You can't have a healthy economy without it being driven by the economic patterns of the lower and midd
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Create more money. As long as we keep innovating, it doesn't matter how big a deficit we run. Reagan proved that. Old people can help innovation, participating in web forums, winning 3D printer contests (see http://news.slashdot.org/story/13/03/04/1428241/ [slashdot.org] "83-Year-Old Inventer Wins $40,000 3D Printing Competition").
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By that logic, the Democrats in the Senate were voted in specifically to keep ACA around... and the House Democrats who passed it the first time were specifically voted in to pass it! And next term, they'll be voted in specifically to push again, and the term after that as well.
I suppose all of the other things Congress does just sort of fade away compared to single-issue fanaticism.
Garden Variety Upgrade SNAFU (Score:4, Insightful)
I'm sure someone will chime in and claim to be the em-effing Change MASTER! but this seems like an ordinary error, the sort I've seen a hundred times before, where one server is a tiny bit wonky, and during the change, something doesn't happen as expected. Normally it's an "inexpensive" error, where some of your VPN users get randomly disconnected... ...and sometimes it's the sort of error where you lose half a billion dollars an hour by HFT trading... ...badly.
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It's true that mistakes can be made and accidents can happen.
It's also true that if you bother to try, you might fix some of those mistakes and catch those accidents before they happen.
Knight Capital didn't even bother to try. At least they managed to find private investors to bail them out after the SEC refused.
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Exactly right. It's like when the rovers landed on mars years ago and one of them was down for nearly a month because NASA had never tested the OS on the rover for a full 30days and the bug that took it out only arose after it had been running 30days. It's an 80 billion dollar project and they didn't test the software for 30days? Sometimes you just have to wonder what the fuck people are thinking.
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Re:Garden Variety Upgrade SNAFU (Score:4, Insightful)
Except they built in enough safeguards that they were able to debug it and get it fully operational. Having done so, it then accomplished it's mission and considerably more.
The appropriate measure varies based on the type of risk.
Re:Garden Variety Upgrade SNAFU (Score:5, Insightful)
There were a number of errors made here.
There were a lot of places that you could put in a control to prevent or limit the effect of these kinds of errors, and that's the lesson people need to learn. Yes, mistakes happen! But try to make it hard to make a mistake, easy to recover from a mistake, and really easy to NOTICE a mistake.
Process???? (Score:2)
We don't need no steenking process!!!!
Cheers,
Dave
to err is human, to fail 100,000/second needs root (Score:4, Funny)
To err is human. To screw up 100,000 things per second requires root.
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why would there be guidelines for automatic risk taking? if they were to implement such, why not just directly give all the hft companies a cut of all trades happening on the exchange..
There should be a mandatory one second delay. (Score:5, Insightful)
This level of trading does not do the market any good, and puts individual investors at a severe disadvantage against firms like this.
It can be stopped. And it should be stopped. And the only reason it is not being stopped is because too many rich and powerful people make too much money on it.
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This level of trading does not do the market any good, and puts individual investors at a severe disadvantage against firms like this.
It can be stopped. And it should be stopped. And the only reason it is not being stopped is because too many rich and powerful people make too much money on it.
I'd go as far as 10 seconds just to eliminate the possibility of assholes pulling shit with different rules for rounding, or horseshit like "our clock was slightly off", etc.
Re:There should be a mandatory one second delay. (Score:5, Interesting)
Personally, I believe if you're going to buy stock in a company then you should be required to hold said stock for at least 24 hours, if not much longer. the stock market was created to allow people to invest their money in a company, thus allow that company to use that money to grow which should result in a return (or loss). It was not designed for gambling, which is what it has become.
Re: There should be a mandatory one second delay. (Score:4)
The market price of the stock affects the company's ability to raise money through additional issues. This affects their ability to take out loans/sell bonds.
Re:There should be a mandatory one second delay. (Score:5, Insightful)
You are confused. "Algorithmic trading" and "High Frequency Trading" are two different things, used for two different purposes. This was caused by AT, and you are complaining about HFS. That makes no sense.
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"SMARS is an automated, high speed, algorithmic router that sends orders into the market for execution"
All "High Frequency Trading" is by definition "Algorithmic trading", though the reverse doesn't necessarily hold.
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This was caused by AT, and you are complaining about HFS.
If it was not HFS; then why were the orders not being presented for human approval?
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It's all black magic to the Luddites, and thus must be banned.
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Are you saying that a gang of "market makers" aka high priests aka railroad barons aka oligarchs, should run the economy because only they know the esoteric and unseen illusions in the system which they themselves engineered?
"magic" indeed. sounds more and more like gaming the system every time i hear about it.
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Translation: "I have no idea what I'm talking about, so I'll just throw around some big words to make myself look intelligent". (Protip: It has rather the opposite effect.)
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Alogrithmic trading and HFT are the same thing.
No they aren't.
That is the only reason to use a computer in the first place; otherwise you just need a handheld calculator
Algorithmic trading predates the invention of digital computers. People with (you guessed it) handheld calculators would crunch numbers according to prescribed rules, and then submit their orders to the trading pits.
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I worked recently for a financial company doing algorithmic trading. Here's how it worked:
Every morning at 7 AM, Master.xlsx would run an "UpdateOrders" macro to check for the prior day's events, and possibly change some green circles to red. Whenever an account under that system needed to sell something, the red circles would go first. Once each year, new green circles were added and red ones were eliminated.
11.5740741 microhertz is indeed high frequency, compared to something like 413 nanohertz.
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Just tax EVERY transaction. Done.
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This is not HFT and as such a small delay would not have changed anything. It went on for 45 minutes, not 45 microseconds.
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At this point, almost all market-making is HFT.
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The method I have proposed to fix this is "cycle trading". Traders submit their buy/sell requests for a trade cycle that happens every minute. Each cycle's trades go to completion if possible, based on buy/sell amounts and prices (bid/ask). Requests will be left over if they cannot be bought or sold in that cycle. They can be flagged to hang in there for the next cycle, or canceled, or changed.
But instead of a one minute cycle, let's do a one day cycle.
Re:There should be a mandatory one second delay. (Score:4)
Hey, that's a great idea. It already exists, but it takes place twice daily: the opening auction and the closing auction on NASDAQ or NYSE. You're welcome to restrict your trading to those auctions.
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This level of trading does not do the market any good, and puts individual investors at a severe disadvantage against firms like this.
Well; it does do the market good... it helps with eliminating inefficiencies.
However; I am of the opinion that there should be a minimum "execution delay"; with all trades timestamped.
Trades should be cleared at 90 second increments; with no trade younger than 120 seconds eligible to be executed. After 90 seconds have elapsed; the trade should become non-
Re:There should be a mandatory one second delay. (Score:5, Informative)
Eh, other posters have already pointed out that you're referencing high frequency trading, not algorithmic trading, so this is offtopic. Nonetheless... where exactly do you think this 1 second delay should be put in, and what would it accomplish? Make the wires "longer"; That would mean less contention for premier data centers in NYC. In one second, you can send a signal around the world five times over. But that doesn't help with the propagation of trade data from which the trades are based on; By adding all that extra lag only in terms of trade execution, but not market data, you're potentially putting billions of dollars at risk as trades are now following market data, instead of running concurrently with them. Think of it this way: You swipe your card to pay for gas. The price shown is $3.55. But when you start the pump, the price drops to $3.54. But you started the pump a second too late, so you're billed a penny more than the guy who waited a split second. Now, multiply this a few million times and suddenly you've got a market crisis. It's the same if you lag the market data but allow trades at full speed.
Let's say you put this one second latency in for both sides; trade execution and market data. How exactly do you syncronize the data when the price itself is determined by trades -- you potentially have more trades waiting to be executed than you have shares... the price is now in some kind of weird state whereby it cannot be accurate until the trades are complete, yet as the trades complete the price is trading. Now you've turned a tiny amount of speculation into a massive amount of speculation. You've made the problem a thousand times worse!
You see, no matter where you put in your "one second delay", you're reducing liquidity, increasing costs, and causing money to be lost out of the system. Your idiotic attempt to help the "little guy" has resulted in utter chaos at best, and only made it harder for him at worse!
High volume trade is just margin trading; Buying low and selling high. Now there's a lot of macroeconomic theory to go into what I say next, too much for a slashdot post, but fundamentally... the more trade there is, the more wealth there is. Lots of trades mean the market is healthy. It means money is moving... and the more money moves, the more it trades hands, the more value that money has. The only time money loses value is when it sits in an account doing nothing. It's like potential energy versus kinetic energy. You cannot harness the power of something that isn't moving.
Every time I hear about people bitch about high volume trading and "the little guy" I die a little inside; It shows a shocking lack of understanding of how markets actually operate, and how these sorts of trades benefit everyone by improving liquidity. The last economic crisis, in fact, the core of all economic crisis, is the lack of money moving. You can't invest because nothing is producing. You can't produce because nobody's investing. These kind of mexican standoffs are what lead to recessions and depressions. Liquidity is at the very heart of any boom, and its absence at the heart of every bust.
The reason why the "rich and powerful" have created a wealth gap is because money isn't trading hands. There's no trade going on -- the middle class isn't buying anything new, they're just paying off old debts. The upper class are the only ones with any liquidity, and they're holding onto money because there's nothing to invest in; If nobody's buying anything, what then is the point of investment? There's no return then. And the poor... they can't invest. They're living hand to mouth, paycheck to paycheck... economically, they're useless. They'll spend every dollar they're handed on the same things every day -- food, shelter, clothing, gas, rent... these things are essential to daily life, but they don't grow an economy. To get economic growth, you need people buying laptops, cars, services, luxury items.
And what started all of this? Ironically, it was a small segment of the population -- th
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I wouldn't add lag, I'd bucket it. 2 second windows. All trades in a 2-second window are collected by the exchange but not executed yet. When the window closes you take all the collected trades, shuffle them into a random order and execute them as if received in that order. Then wait for the next window to close and the next batch of trades to be processed.
Yes, this is going to thoroughly screw over anyone trying to take advantage of changes in prices over sub-2-second timeframes. The sensible reaction to t
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The orders all go into a black box. At the next tick of the clock, they are matched up and not before. Until then, nobody knows what the orders are except those who posted them. Where is money lost? Where does data and trades get out of sync?
Make the interval 5 minutes and you have a system moving at a reasonable human speed. Suddenly success in the market can be had by any PC on the internet. No need at all to be in a very special rent seeking datacenter. If something goes wrong, it can be caught and corre
Validation? (Score:5, Funny)
Damn the validation. Full speed to prod!
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What does this have to do with "validation"? TFA talks about *partial* deployment, one server didn't get the update.
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No testing, no test deployment in a mirrored environment, no one validated that the deployment was correct.
If these things are the heart of your income, you take a hash of everything pre-deploy and post-deploy, and make sure it matches everywhere it has to.
Then you validate that the hash list matches everywhere. That's just common sense. I've worked plenty of places where income was not directly tied to what was deployed I developed a manually intensive way to do exactly the same thing - make sure you de
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Yeah, sounds more like a botched migration than any failure to test. And that was allowed to go forward because of a lacking in their formal migration process.
There are a lot of growing pains when moving to entire systems of new technology. Testing the technology in pieces (unit testing) and as a whole (system testing) is already a given. For things that really matter though (like money), the processes themselves need to be tested and refined. I've seen a lot of processes go to production, i.e. used on prod
Failure of best practices (Score:5, Insightful)
No proper change management, no peer review, no proper lab testing. Dev should always reflect production to the greatest reasonable level. No proper maintenance windows. You should never be surprised by a change in production. This is a case study in incompetence and the failure to execute industry best practices. I'm guessing the guy or gal who raised the best practices flag was ignored as being inconvenient or too expensive.
If I'd done this kind of thing when I was working with the exchanges I would have been fired in a heartbeat. Whoever failed to utilize best practices, or whoever failed to allow the utilization of best practices had damn well better have been fired. This is incompetence of the highest level and a perfect example of why ITIL based best practices were born.
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It's very easy to do all of these things, and then have one server get missed from your production change list. ...and your validation check *seems* OK.
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No proper change management, no peer review, no proper lab testing.
Also, there appears to have been no run-time checks or assertions. I have seen high reliability systems where 90% of the code is various run-time sanity checks, and only 10% implements the actual functionality. And that was for systems with a failure cost of way less than $400M.
Re:Failure of best practices (Score:4, Insightful)
Dude, Wall Street traders demand software engineers get things done in minutes and hours!
There is no process as it all had to be done yesterday if you ask anyone who has worked in that environment.
They pay top dollars and change core algorithms on the fly as each millisecond costs money to a competitor who has a more efficient trading algorithm that steals from their own HTC network.
So when when skims and manipulates the prices in milliseconds they steal from those who have process engineered designs who are too slow to react.
If it messes up they get bailed out by the SEC anyway and they can just fire the programmer.
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No proper change management, no peer review, no proper lab testing. Dev should always reflect production to the greatest reasonable level. No proper maintenance windows. You should never be surprised by a change in production. This is a case study in incompetence and the failure to execute industry best practices. I'm guessing the guy or gal who raised the best practices flag was ignored as being inconvenient or too expensive.
If I'd done this kind of thing when I was working with the exchanges I would have been fired in a heartbeat. Whoever failed to utilize best practices, or whoever failed to allow the utilization of best practices had damn well better have been fired. This is incompetence of the highest level and a perfect example of why ITIL based best practices were born.
I didn't read TfA, but from TfS, none of what you said would solve this problem, or a better way to put it is they all could have actually taken place to a reasonable degree.
Is it generally expected or practical to test combinations of versions of the same software in a cluster? Only automated testing could catch a problem like that, and you'd need a simulated production workload.
A "reasonable" development environment would NEVER reach that far. That is a very above average QA environment.
Of course everyb
IT Debt (Score:5, Insightful)
They had some code that processed orders in a special way. There was a flag on the order they could set that would trigger that code. We will call this Power Peg. They later moved away from that functionality but it still existed in the system. It sat there for years untested and unused. 9 years later they added new functionality and decided to reuse that same flag. The new code also disabled Power Peg.
When they pushed the new code into production, they missed a server. That missed server still had Power Peg looking for that flag. Orders started setting that flag and it was processed correctly on all but one server. But that last server was placing orders incorrectly. The logic that Power Peg used was not valid anymore. In a panic they rolled back the code on the servers. Not knowing that Power Peg was the issue, they now had all the servers running Power Peg again.
RE:Application of TP2anus until the paper is clean (Score:2)
The have your punk kid nephew do it mentality (Score:4, Insightful)
1. Python. I thought all the quants liked C, assembler, and even VHDL for their high frequency stuff. No matter
2. "2nd technician to review". If this were flight hardware or a bridge or skyscraper, there would be a second "technician" to review and at least one "engineer" to personally sign off that what was built/deployed is a) done right and b) is what you want
3. "no written procedures". There are a very small number of things in life about which it is absolutely imperative to keep a rod firmly up one's ass: a. moving machinery, b. formal mathematics, and c: hundreds of millions of dollars of your clients and shareholders' money.
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It was a Python blogger who happened to report about it, but Knight's code was not written in Python.
Re:The have your punk kid nephew do it mentality (Score:4, Informative)
1. Python. I thought all the quants liked C, assembler, and even VHDL for their high frequency stuff.
Not necessarily. For example, an HFT company Jane Street Capical [janestreet.com] uses OCaml, claiming it makes code reviews go a lot faster and Knight-style errors a lot less likely. https://queue.acm.org/detail.cfm?id=2038036 [acm.org]
And nothing (Score:2)
I predict (Score:2)
Testing in production (Score:2)
Stay HTTPD, my friends (Score:2)
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So...where did the money go?
The money went to the people on the other side of the trades. Knight lost $400M. Many other people, accumulatively, gained $400M.
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Re:They got bailed out (Score:4, Informative)
Actually, they asked the SEC to bail them out and got the boot. They had to do a round of private investment and diluted shareholders' value quite a bit. It's generally cited as the "right way" to deal with companies that fuck up and lose billions. Shame we can't do the same with the banks.