Glitch Watch: May 6, 2010 to August 1, 2012
August 2, 2012
Knight Capital’s unchecked algorithm Thursday was just the latest “technical issue” roiling the United State’s highly automated equities markets.
“While it is reassuring that the issue was caught, preventing a larger-scale crash like the May 2010 Flash Crash, the fact remains that this may have been prevented entirely had the firm responsible been utilizing adequate controls such as real-time surveillance and risk monitoring. Algos can move so quickly that by the time a human has noticed an error, it's likely the damage has already been done," said Dr. John Bates, said executive vice president and chief technology officer at Progress Software.
In all cases, markets have resumed normal operations within minutes. But the lasting impact is likely to be on individual investors, who may avoid putting their capital into markets that can unexpectedly run amok.
“In this instance, it is not the pigs that get slaughtered … but the lambs,’’ said Adam Sussman, partner and director of research at Tabb Group.
Here is a short timeline of significant glitches including and since May 6, 2010.
MAY 6, 2010
FLASH CRASH
U.S. equity markets drop 481 points in 6 minutes and recover 502 points in next 10 minutes. At worst point, Dow Jones Industrial Average down nearly 1,000 points for the trading session.
Closing Values:
DJIA: 10,520.32 Volume: 4,598,900
S&P500: 1,128.15 Volume: 10,617,809,600
February 5, 2011
NASDAQ DIRECTOR’S DESK INTRUSION
Nasdaq OMX Group tells customers that a service that promised more than 10,000 directors of corporate boards that they wouldn't have to worry about their communications "being posted on the Web or landing in someone else's inbox" had "potentially" been hacked.
DJIA: 12,092.15 Volume: 1,217,800
S&P500: 1,310.87 Volume: 3,925,950,000
October 13, 2011
DIRECT EDGE SANCTIONED
The Securities and Exchange Commission sanctions Direct Edge for weak internal controls that led to millions of dollars in trading losses and a systems outage. The affected trading involved an estimated 27 million shares in about 1,000 stocks, with the amounts in question amounting to roughly $773 million.
DJIA: 11,478.13 Volume: 1,439,900
S&P500: 1,203.66 Volume: 4,436,270,000
March 23, 2012
BATS IPO FAILS
BATS Global Markets, operator of two national exchanges, fails in its bid to go public. This was to be the first launch of a stock on its own listing market using its own technology. Its systems malfunctioned. At one point, BATS shares were priced as low as $0.0002 each. The company cited a “software bug” of its own making and withdrew the IPO.
DJIA: 13,080.73 Volume: 1,299,300
S&P500: 1,397.11 Volume: 3,472,950,000
May 18, 2012
FACEBOOK IPO FOULUP
A “race condition” in the Nasdaq Stock Market’s IPO Cross system delays the opening of trading on the first day of Facebook shares going public. Execution reports for shares traded in the IPO cross as well as cancellations for marketable orders entered between 11:11:00 and 11:30:09 were not distributed by the system.. The outstanding execution and cancel message were distributed at t 1:50:00 p.m., more than two hours after trading begins. Knight Capital takes a $35.4 million pre-tax charge from losses incurred in making a market in Facebook shares. UBS takes a $357 million charge. Both consider legal action. Nasdaq creates a $62 million compensation fund.
