Slashdot Mirror
Computer Problem Caused Price Errors on NASDAQ
buckthorn writes "An article running on Yahoo News states: 'A computer problem at an unidentified stock trader caused erroneous, exaggerated prices -- some as high as $950 per share -- to be posted to the Nasdaq Stock Market Friday morning for 1,680 different stocks, a spokeswoman for the Nasdaq said.'"
Good afternoon gentlemen. As you are all no doubt aware, I have perfected a method of manipulating the various stock exchanges throughout the world. You received proof of this this morning, as relatively worthless Nasdaq stocks such as Maxco, Inc. and J.W. Mays Inc. traded briefly at hundreds of times their real value. I believe my latest caper, which I've puckishly dubbed 'Operation Stocking-Stuffer', is certainly worthy of your attention...
You see, gentleman, when 'Operation Stocking-Stuffer' is deployed in earnest, all stock exchanges will be laid waste...all trade will effectively cease, and global civilization itself will crumble...that is...unless you pay me...
Gentleman, you have my demands...peace out.
____
~ |rip/\/\aster /\/\onkey
Sell! Sell!
A problem where technology caused wildly erroneous stock prices? I liked it the first time around when it was called the dot com bubble. The parties were better.
Was first post on a non-duped Slashdot story on part of the demands?
http://en.wikipedia.org/wiki/Signature_bloc
It was either a programming error (human) or an operator error (human) or some other cause. OK, clearly hardware faults can cause data corruption, but this is really pretty rare and it's hard to believe that a hardware fault could cause such a widespread fault.
The real "Libtards" are the Libertarians!
Michael Bolton: I must have put a decimal point in the wrong place or something. Shit. I always do that. I always mess up some mundane detail.
Rule #1 -- Politics always trumps technology.
Just look at SCO's share prices.
Damnit, I could have made some money! Except that my funds are tied-up in a Nigerian opportunity at the moment. But boy-o-boy is that opportunity gonna make me rich! Rich! I say!
Well, that's also why there's a 3 day grace period from the order to the close.
It's not just there to allow for slow paper to move, but there to allow rollbacks.
-- Tigger warning: This post may contain tiggers! --
working for a large bank on a program trading system (yes it runs on linux) automating orders on behalf of clients this is the sort of thing that gives us the cold shivers.
one coding error can suspend the trading of a major stock, or worse as in this case move the price miles from where it should be.
theoretically the exchanges shouldn't allow you to do this. some work by suspending automatically and restarting with an auction, some work by suspending it. locking you out and fining you loads of cash. this costs you big as nobody else can trade that stock through you for a while. thats really expensive - the lost business.
when your taking in client orders and trading them automatically and you recieve orders via say FIX.
yes you do lots of checks with vol, movement on the day, movement since the close, momentum etc.
but how well do these checks work when your market data feed has gone down (or worse gone wrong) or even gone down, but the heartbeat process is still pinging so you think you have a good price?
but i guess sometimes we get it wrong just like anywhere else. this is just a rather high profile and embarrassing example.
still they won't do it again (for a while)
This issue was actually caused by trading software provider Trading Technologies (who are currently suing all of their clients due to supposed patent violations). It was caused by a bug in their automatic spread trading module, which caused it to run amok on one of their client's trading consoles.
In the extended hours markets, some traders post bids or offers at outrageous prices, hoping someone will make a mistake. They will offer to buy some stock for $0.02 per share or sell some stock for 200.00 per share (that normally trades $20 a share) in hopes that someone screws up. The low cost of participating in an electronic market makes it easy to post these orders.
The real lesson is that stocks don't really have "a price" in a traditional sense. (At best, the price on the last transaction serves as a proxy, but is no guarantee of getting that price in the future). In reality, stocks have both a bid and an ask price. For thinly traded stocks (especially in the off-hours), the bid-ask spread can be very very large.
Buyer (and seller) beware.
Two wrongs don't make a right, but three lefts do.
after some poking around, I believe the unidentified trader was scotttrade. if you use the ticket on their website, it's the only one I've found that reports the incorrect highs (such as maxco being traded for $951.47). you can find other ones if you look hard enough...
No, but they did trade at 3.14159265
- Minutus cantorum, minutus balorum, minutus carborata descendum pantorum.
Believe you me, the NASDAQ is one of the only major exchanges I mildly trust precisely because it is electronic. Other major exchanges, notably the NYSE, involve human floor traders gathering around posts and barking out bid and ask prices.
Do you have any idea how crooked stock trading through middlemen is? There are a thousand ways the retail investor and small trader gets screwed. For instance, market makers are definitely not impartial and favour their own trades ahead of clients'. You can not even catch the fraud the occurs. There are about a dozen NYSE market specialists that are charged with fraud every year.
There is absolutely no reason to involve humans in the securities trading process any more. None! The rampant fraud can be easily avoided. When things like this are publicized, I almost wonder if it's got some bias in favor of the human trade specialists who make trading floor operations tick. They're useless middlemen, profiting from spreads and leverage.
Electronic trading is the only way to go. When an exchange switches to electronic, you should see that as a sign of quality and a commitment to do away with the fraud that EVERY insider knows is a standard mode of operation in stock trading.
I was actively involved in todays "mess." The root cause of the problem was related to the prices which were using for electronically making markets in stocks which did not have any trades yesterday. When there is no activety for a stock in a day, the price quote is always 0 x 1900. The median of these two numbers is 950. A firm who makes markets in ALOT of stocks, accidentally changed their systems to use the midpoint at yesterdays close instead of the normal final print. So they started putting up quotes at 950.00 thus causing the problem. All the trades 15% out of the market from the previous close were broken. The money wasn't "removed" from peoples accounts since the proceeds or loses from a buy or sale of stock aren't realized for atleast 3 days.