Wall Street and the Mismanagement of Software

CowboyRobot writes "Last week, a bug in high-frequency trading software from Knight Capital Group resulted in erroneous trades costing almost a half-billion dollars. So, what went wrong and how can they, or any other software developer, prevent something similar from happening again? In hindsight, it's clear that the developers did not verify the code under enough conditions. But the real issue is how these high-frequency trades work in the first place. Robert Dewar at Dr. Dobb's suggests the financial industry needs to take a page from the avionics rulebook, which has very strict guidelines about what code can be implemented due to the high cost of failure in that field. 'High-frequency automated trading is not avionics flight control, but the aviation industry has demonstrated that safe, reliable real-time software is possible, practical, and necessary. It requires appropriate development technology and processes as well as a culture that thinks in terms of safety (or reliability) first. That is the real lesson to be learned from last week's incident. It doesn't come for free, but it certainly costs less than $440M.'"

Comments

Re:This will slow them down

[dkleinsc]

There's a much better way to stop it, actually: Tax each trade $0.01 per share. This isn't a significant burden on typical investors - you make a few trades of $10000 a year, you pay only a fraction of that in tax. But it is a big deal for the HFTs who are trading millions of shares a day trying to profit off of 10 cent differences.

This is of course not my idea: Tobin Tax