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 Bots lose 1/2-million $ in less than an hour
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Posted - 08/05/2012 :  09:45:01 AM  Show Profile  Reply with Quote
Robot trading loses firm $440 million in 45 minutes

Paul Marks, chief technology correspondent


The dangers of high-speed, computerized stock trading - which have in the past caused inexplicable "flash crashes" in the markets - have now been visited big-time upon one of the companies in the vanguard of wielding the technology.

Trading software at Knight Capital Group of New Jersey this week began automatically buying shares in a vast array of companies - like Radio Shack, Ford Motor Company and American Airlines - in a 45-minute foray of unauthorized trading. When the company then quickly resold its newly acquired, unwanted stock (its massive stock buys had moved the markets) it found it had lost $440 million - four times the profit it made in 2011.

The loss has seriously hit the company's ability to conduct business, says The New York Times. The newspaper says Knight Capital has been a hyper-enthusiastic user of automated trading - indeed, it calls Knight Capital an "unapologetic advocate" of it - and says the firm has striven to outperform its competitors by using such systems to their fullest extent.

The news won't surprise observers who understand the technical limitations of trading with fallible computer systems at speeds humans cannot fathom. The Bank of England warned last summer that high-frequency computerized trading systems that buy and sell shares in fractions of seconds risk destabilizing stock markets, with the bank's executive director for financial stability describing the use of such algorithms as "a race to zero".

The US Securities and Exchange Commission is investigating just what happened at Knight Capital - and calls for tighter regulation of computerized trading have already begun.

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3053 Posts

Posted - 08/09/2012 :  11:35:23 AM  Show Profile  Reply with Quote
Serves them right.
I did some trading a couple years back and it's not about investing a company to help it grow and share a bit in their prosperity anymore.
It's coked out jerks in suits wanting to get paid millions ****ing everyone with a business that actually does something over.

Basically playing poker using businesses as the chips.

KC's Kruisers - It's all how you look at things
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