It liquidated individual legs, leaving many loose ends, which definitely affected the delta.
More importantly, I will explain clearly what I was referring to, as follows:
1. The "net liquidation value" is an average between the bid and ask.
2. The gross position value (GPV) refers to the market value of each of the individual legs in the portfolio, both long and short.
3. If the GPV exceeds the net liquidation value, by a 50:1 ratio or more, the system goes into auto-liquidate (so we found out).
4. Liquidation occurred as individual legs which were sold at market, which meant they were sold at below net-liquidation value.
5. E.g. Selling an individual leg at market for $.10 below the net liquidation value, means any option priced below $5.00, doesn't help the situation rather FEEDS the problem, as the ratio may change from 50:1 to maybe 53:1, which is what happened here.
That means the customer is damaged, and the job of decreasing the broker's "risk" was not achieved, rather his "risk" increased.
6. Overall, the ratio stayed close to 50:1 quite constantly, and nothing was being achieved. 800 plus options were liquidated, (instead of 100 properly selected ones) and it started at-it again the next business day.
7. Conclusion: the software is/was not programmed to solve leveraging problems, albeit it's what being used for all problems.
The software must identify the highest priced options to be effective. Here, 100 options could have stopped the problem instead of 800.
(I may be on a tight schedule for a couple of days).