Details of Knight $460 million disaster

It has been little more than a year ago when Knight updated some stuff on their servers, and lost over 460 million dollar. The firm bought in 80 stocks a total of $3.5 billion and sold short 74 stocks for $3.15 billion. That’s a nightmarish bug in the trading software. A document with the SEC gives a fine insight in the matter. The root of the problem was a software module not used for almost nine years, and still installed on a server.

Full details from the SEC over here, but for an easy read and good summary check Python Sweetness, How to lose $172,222 a second for 45 minutes. You could read it as a guide how not to run an automatic trading operation. The fine for inadequate risk procedures was $12m. That’ll teach them.

Getco was the white knight saving them from bankruptcy – the firms completed their merger in July this year. Getco kept their logo but the firms move on under the name KCG Holdings.