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CNBC Software Flaw Worth $1 Million?

Posted by Zonk on from the that's-quite-a-bug dept.

Strudelkugel writes "BusinessWeek tells the story of one obsessive fan who unraveled a software glitch worth one million dollars. Jim Kraber was a regular CNBC viewer, and when the opportunity arose he took the 'Million Dollar Portfolio Challenge' very seriously. At one point, he was spending 12 hours a day on the contest, using three computers to trade 1,600 different portfolios in a theoretical stock game. His efforts got him into the top 20 finalists, but in the last round of trading he noticed some unusual patterns. 'One trader had a stream of near-perfect picks, consistently placing huge bets on shares that soared in after-hours trading. Kraber suspected the trader and perhaps others were getting help from someone who was changing their picks after the stocks' increases — and he quickly notified CNBC ... Kraber says CNBC rebuffed him at the time, but now it looks like he may have been right.'"

4 of 151 comments (clear)

  1. The glitch by niceone · · Score: 5, Informative
    Here's 'the glitch' if you don't want to wade through the article:

    If you made the selection before the close of regular trading at 4 p.m. EST and left your Web browser open, you could execute those trades after hours and still receive the 4 p.m. closing price. ..... The allegation is that certain traders may have used the technique with companies that were reporting earnings and other important news after the market's close. They could select as many as 50 stocks and then execute trades for only the one or two best performers.
    --
    ccalam - acoustic versions of new songs.
  2. Re:"Glitchs" in the financial markets by Plutonite · · Score: 5, Interesting

    Those interested in the volatility (and thus profitability of "glitches") of the forex markets should check this excellent article on the structuring of the currency markets.

    http://www.forexfactory.com/showthread.php?t=7484

    Glitches aside, forex is a great place for smart geeks to make (and lose!) money on the side. All you need now is an internet connection and a mini bank account, whereas 10 years ago this was the exclusive arena of millionaire hedge fund managers. Warning: addiction very probable. Try at your own risk.

  3. Re:"Glitchs" in the financial markets by Plutonite · · Score: 5, Interesting

    All retail brokers for the forex market offer these services now, it's not just one site. Stocks are a different story.

    The most popular client platform is MetaTrader, and every broker has their own customized version which connects to their servers. There is an entire C-based language used to program your experts (they call them expert advisors) and you can indeed open multiple demo accounts at no cost. And the capabilities are so great you can easily download scripts that parse news events released real-time on websites and react accordingly with no input from you.

    Isn't it amazing what Turing machines can do? Word of warning though: you will never get rich on an black-box like an algorithm. Use the technology, but don't get carried away.

  4. Anyone can win with 1600 portfolios by bhmit1 · · Score: 5, Interesting

    This reminds me of an old email/fax scam trick. You start sending 1600 messages to people on a stock that's going to have big news the next day, either very good or very bad, no one knows. To 800 of those people, you say it will be good, and the other 800, you tell them it will be bad. The next day, you take the 800 who you predicted the right answer for, take another stock with big news coming out, and 400 of those people will end up with the right answer. Then 200, and on the 4th day, 100. Now for those 100 remaining people, you send a message saying that you've been giving valuable stock picks for the past 4 days and how much would they be willing to pay for your tips. The moral, everyone is a winner when your losers don't count. If you were hoping to find a good stock trader from this contest, this wasn't the way.

    As for the bigger picture, I'm not a fan of "trading", though it does have it's place. I'd rather use the market for long term "investing" and doing something that provides value to the world with the rest of my time. But just like with power and politics, money corrupts, so we should expect that people will abuse the system and just do our best job ensuring we aren't the ones they are abusing.