Algorithm trading: Ghosts in the machine

[kaciara]

Not long after lunchtime one day on the New York Stock Exchange three years ago, unusual things started to happen. Hundreds of thousands of “buy” and “sell” messages began flooding in, signalling for orders to be made and simultaneously cancelled.

The volume of messages sent in was so large that the traffic coming into the NYSE from thousands of other trading firms slowed, acting as a drag on the trading of 975 shares on the board.

The case was made public only last month when the disciplinary board of the NYSE fined Credit Suisse for failing adequately to supervise an “algorithm” developed and run by its proprietary trading arm – the desk that trades using the bank’s own money rather than clients’ funds.

more...

http://www.ft.com/cms/s/0/c4baf670-1bfe-11df-a5e1-00144feab49a.html?ftcamp=rss

 

[cgeorgan]

Sh*t happens.

 

[monstimal]

Why all the "quotation" marks? Are they not really algorithms, buy orders, throttling systems...?

My favorite paragraph:

It was a close call for the NYSE. Asked if the exchange could have been shut down as it was bombarded with false trades, an exchange official says: “If you had multiplied this many times you’d have had a problem on your hands.”

We were only many times the number of orders away? That does sound like a close call.

 

[kaciara]

i don't believe exchange can be shut down by order flooding...

 

[cgeorgan]

Quote from kaciara:

i don't believe exchange can be shut down by order flooding...

If you're familiar with this:

http://en.wikipedia.org/wiki/Denial-of-service_attack

Then the concept we are discussing should not surprise you.

 

[FredBloggs]

Quote from kaciara:

i don't believe exchange can be shut down by order flooding...

thats a point.

im sure the credit suisse servers that generated the orders are nowhere near the capacity (by 'many times') of the mainframes on the exchange matching engine.

 

[cgeorgan]

Quote from FredBloggs:

thats a point.

im sure the credit suisse servers that generated the orders are nowhere near the capacity (by 'many times') of the mainframes on the exchange matching engine.

Actually, I would say that you have that completely backwards.

 

[kaciara]

Quote from cgeorgan:

If you're familiar with this:

http://en.wikipedia.org/wiki/Denial-of-service_attack

Then the concept we are discussing should not surprise you.

do you think exchange companies (and their advisers) would set up a main frame without evaluating a DoS attack?

 

[cgeorgan]

Quote from kaciara:

do you think exchange companies (and their advisers) would set up a main frame without evaluating a DoS attack?

Show me a 12 foot wall and I'll show you a 13 foot ladder.

Hope that answers your question -

 

[kaciara]

Quote from cgeorgan:

Show me a 12 foot wall and I'll show you a 13 foot ladder.

Hope that answers your question -

rhetoric. by this logic even air force one is obsolete.