A High Frequency Trading proprietary algorithm crafted by highly compensated brains-on-sticks and nurtured in the bowels of an investment bank escaped into the wild. From its carefully co-located massively parallel high speed trading computer it emerged to wreak havoc on the financial markets. In this case, it was a happy ending. The algo turned on its master and sucked the very life blood out of the firm that deployed it.Once Knight Capital’s algo was identifed as the culprit, the public company’s stock was slashed by 1/3 – a $300 million market cap haircut decapitation. That was Wednesday before we knew how much the algo lost on the trades. On Thursday morning KCG’s stock was slashed in half again when the trading loss was being reported at $440 Million. The incident is yet another lights-flashing, klaxon-blaring warning signal that competing HFT algorithms operating with the speed, size and complexity that are commonplace today cannot be adequately regulated, tested, or managed. Their interactions with each other cannot even be fully understood or predicted.
Archive for the 'Regulations' Category
First it was the wishy-washiness of the civil rights act repeal and now it’s criticism of the administration being tough on BP? Watch the video… Here’s the thing…yes, accidents happen on offshore oil rigs. However, most damage is mitigated by appropriate safety measures being put in place to keep spills to a minimum. However, recent […]
Even though he’s only been in office for 5 months, this has still be a long time coming. And there are some important measures being introduced for home loans and consumer protection. From Wash Post: Many of the specific proposals will require legislation, and today’s announcement will drop the plan into an already heated debate […]
Thanks to John, I am pointed to these two rather strange arguments in favor of the Drug War and against libertarian use of statistics on race against the Drug War from Jonah Goldberg. John does a pretty good job explaining why Goldberg’s arguments are so strange. The only thing I’d really add is that the […]
And after the AIG mess, I say we give it to him. How we allowed one company to take down the entire system still feels unreal to me. How on earth could we allow that to go down? Crazy, crazy, crazy. But it did happen and we are suffering massive fallout as a result, so […]