Disclaimer: The opinions of the columnists are their own and not necessarily those of their employer.
C. Warren Axelrod

Glitch Reporting Glitch. Where was V&V?

You are likely well aware of the computer failure that cost Knight Capital Group, Inc. $440 million in just 45 minutes at the opening of the New York Stock Exchange on Wednesday, August 1, 2012. A programming mistake apparently caused KCG’s trading system to send out large numbers of erroneous orders. Some believe that the programming error occurred as a result of KCG’s aggressive push to install a new version of their trading system to coincide with operational changes at the NYSE.

But are you aware of a glitch on the Bloomberg News website?

I was scanning the various reports of the KCG meltdown on the web late Thursday evening, and was reading an August 2-3, 2012 article by Christopher Condon of Bloomberg News with the title “Some ETF Spreads Widen as Knight Capital Seeks to Survive.” But what was this? In a sidebar on the left side of the screen, with the title “Companies Mentioned” it showed that KCB’s share price had dropped 168.99% (that’s right, almost one hundred and sixty-nine percent!). How could that be? The most a stock can lose is 100 percent of its value (which is not true of some options, however). The August 2 closing stock price for KCG was shown as $2.58, which resulted from a drop of $4.36. Well, if the calculation is the change ($4.68) over the price ($2.58), then 169% is correct. But it was obviously the wrong calculation. Incidentally, the percentage changes in share price for Morningstar Inc. and State Street Corp., in the same sidebar, were similarly miscalculated.

One Comment

  1. Kevin Fitzgerald Aug 13, 2012 at 8:28 pm | Permalink

    People are the biggest computing risk. Programming integrity has always carried the biggest potential payload for errors. Quantitative Risk Analysis is a powerful motivation to build-in code checking and independent testing with sign-off. Costs are much easier to justify when you have a dollar figure for the Annual Risk Exposure. (Think seat-belts, it’s an attitiude thing.)

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