Sea of Troubles

➞ Knight Algo Nightmare Dents Market as Trader Sounds Alarm


Knight said today that losses from the trading breakdown are $440 million, almost quadruple its 2011 net income and more than some analysts had estimated, and the firm is exploring strategic and financial alternatives.

Welcome to the brave new world of automation risk, where a trading firm can lose four years of profit in less than an hour. It’s happened a couple of times (remember the “flash crash”) in financial markets, but this is one of the first traced to a specific entity and which threatens that entity as a going concern.

Independently, this is another good wake up call to consider what other automation we have in place. As Chris Hoff argued after the flash crash:

[As] automation matures and feedback loops become more closed with higher and higher clock rates yielding less time between execution, our ability to both detect and recover — let alone prevent — within a cascading failure domain is diminished.

How much of your organisation’s critical compute, network, or storage is manageable by a given automated process?