Algo firm that blew up in 2003

ogarbitrage · Jul 13, 2011

Anyone know who this was?

For example, in 2003 a U.S. trading firm became insolvent in 16 seconds when an employee who had no involvement with algorithms switched one on. It took the company 47 minutes to realize it had gone bust and to call its clearing bank, which was unaware of the situation.

Page 5 on http://www.chicagofed.org/digital_assets/publications/policy_discussion_papers/2010/PDP2010-1.pdf

Cited to: Andreas Preuss, 2007, Eurex CEOâs comments from ExchangesâThe CEO Perspective panel, Futures Industry Association Expo 2007, Chicago, November 27.

I cannot find a record of these comments anywhere.

Soon2Bgreat · Jul 13, 2011

Considering the circumstance, it might not be surprising if this person is referred to in the past tense.

bidask · Jul 13, 2011

the1 · Jul 13, 2011

Why doesn't the market ever go the right way when shit like this happens? Just the other day I hit "buy" when I meant to hit "sell." Guess which way the market went? Of course.

SnakeEYE · Jul 13, 2011

Quote from the1:

Why doesn't the market ever go the right way when shit like this happens? Just the other day I hit "buy" when I meant to hit "sell." Guess which way the market went? Of course.

atticus · Jul 13, 2011

I can't recall the name, but it was something like a $20MM debit, so it escaped the wires. I am sure they are named in some article, but I can't find it.

bone · Jul 14, 2011

Great find, thanks for the link.

More recently there was a Chicago firm who shit the sheets with a Nymex WTI 'lead-lag' strategy - although those losses were survivable given the firm's capitalization. Trader switched on a freshly minted strategy in a super-thin market just a few minutes before the close.

ogarbitrage · Jul 14, 2011

Quote from bone:

Great find, thanks for the link.

More recently there was a Chicago firm who shit the sheets with a Nymex WTI 'lead-lag' strategy - although those losses were survivable given the firm's capitalization. Trader switched on a freshly minted strategy in a super-thin market just a few minutes before the close.

Good old Infinium.

bone · Jul 14, 2011

Quote from ogarbitrage:

Good old Infinium.

Being located in Chicago I did not want to name names.

KINGOFSHORTS · Jul 14, 2011

Quote from the1:

Why doesn't the market ever go the right way when shit like this happens? Just the other day I hit "buy" when I meant to hit "sell." Guess which way the market went? Of course.

I remember a junior trader calling me about the put options he shorted and the price he got for the contracts. I told them that price makes no sense and to double check things. (the price he quoted was the ask)

Anyhow 5 minutes later he calls and told me he went long in error and wanted to know how to get out of this trade.

I went by and he was paper white. He went long a large number of contracts, it took all day to unwind that position. And of course the vix was dropping and markets were going up that day.

It was a manageable loss and took a lot of work hedging and unwinding but it could have gone wrong real bad.