Goldman Suspends 4 Senior Tech Specialists After Trading Glitch

First time accepted submitter sbjornda writes "A glitch in an internal system led to erroneous trades on some funds whose listings begin with the letters H through L. Goldman Sachs has put four Senior Technology Specialists on administrative leave as a result. From the article: 'The system, called a "trading axis," monitors the Wall Street bank's inventory to determine whether it should be a more aggressive buyer or seller in the market. But a technical error misinterpreted non-binding indications of interest, or IOIs, as firm bids and offers, leading to some trades that were vastly out of line with where market prices were, Reuters reported previously, citing a source familiar with the matter.'"

Comments

Let me get this straight

[Noxal]

Some high profile companies/people fucked up and lost money, so the market shut down.

Why didn't it shut down when I lost money in the stock market? Oh right, $1500 isn't enough for me to matter.

I'm sure I'm wrong on this. Someone correct me!

Re:Let me get this straight

[olsmeister]

This didn't cause the market to shut down. It may have caused GS to lose some money.

Re:Let me get this straight

[Em Adespoton]

Some high profile companies/people fucked up and lost money, so the market shut down.

Why didn't it shut down when I lost money in the stock market? Oh right, $1500 isn't enough for me to matter.

I'm sure I'm wrong on this. Someone correct me!

When your loss can trigger a sell wave, they'll shut the market down to investigate. The market wasn't shut down because GS lost money, but because something was obviously systematically wrong, and they wanted to figure out what it was before allowing more trades. Once they found out what it was, they could have brought everything back up, as it was just a bad algorithm used by a single (large) trader.

it's kind of like if you get hit with a pebble vs hearing a loud rumbling sound and getting pelted with pebbles -- you're more likely to vacate the area and then investigate in the second instance, even if it's the same monkey hitting you with multiple pebbles.

Re:Let me get this straight

[localman57]

In the grand scheme of things, though, it isn't that much money. Their plan to blow up a nursing home, for instance, won't be affected by the loss.

Re:Let me get this straight

[Jayfar]

Some high profile companies/people fucked up and lost money, so the market shut down.

Er no, this was an unrelated glitch with Goldman 2 days *before* last weeks Nasdaq shutdown.

Re:Let me get this straight

[sjames]

And it just happens that it provides a great way for the 1% to remain the 1% while bleeding everyone else dry.

It's a good argument for not allowing any legal fiction to be too big to fail (or jail).

Re:Let me get this straight

[Anonymous Coward]

Err... NO. If Goldman had a computer glitch that caused erroneous trades, that's their fault and they should lose money for that and the market SHOULD go down, and trigger sell waves or whatever. Nobody else gets do-overs, neither should Goldman.

Re:Let me get this straight

[Em Adespoton]

Err... NO. If Goldman had a computer glitch that caused erroneous trades, that's their fault and they should lose money for that and the market SHOULD go down, and trigger sell waves or whatever. Nobody else gets do-overs, neither should Goldman.

There's no do-over here; the system was halted, it wasn't reversed. All those trades went through, and can't be reverted. But they didn't know what caused it until they investigated, and they aren't going to let people continue trading when something fishy might be going on.

This is the way it's designed* to work

*albeit designed by those who profit from the system -- a circular thing, as anyone who profits under the current system becomes one of the "big guys" and has a vested interest in perpetuating the system that makes them money.

Re:Let me get this straight

[lgw]

Goldman Sacks should never be confused with 1%ers They're the 0.000001%ers. The regulators that are supposed to regulate GS? Mostly former or future GS employees (or both). If the people who decided to suspend trading weren't GS employees once, they will be soon.

The 1% is doctors, lawyers, and successful small business owners, who have just as much power here as you do. It's a bad term if you want to discuss the one company that owns more of the government than anyone else!

Tokens.

[Seumas]

The disgusting criminals at the top sacrificing a few pawns.

Re:Tokens.

[You're All Wrong]

Have some respect, that's your government you're insulting! http://geke.us/GS.html

(OT - And incidentally, in case anyone interprets my .sig as being anti-Obama, I first set it while Bush was in power, and just never got round to changing it. For obvious reasons.)

Re:Tokens.

[Billly Gates]

Look the CEO's and senior traders who play games of golf and have 2 hour elaborate lunches at the best NYC restaurants create all this value through their handwork.

They do not need to be distracted by the mundane details of actually trading and need to just think of ideas all day instead. Distractions need to be minimized as do work. ... now these IT guys who program the computers that earn them the flash trading? They are greedy COST CENTERS. They have no value! Lazy! Can be replaced by H1B1 visas faster than you can say campaign contribution. Fire them as they do not create value at all.

By playing golf and thinking mysterious powers are telepathically entered into the HFT systems and money is just generated out of thin air. I think these guys need a big bonus for being so smart for this? Don't you?

Quick Catch - No Peer Review

[tiberus]

I'm surprised to hear new about 'suspects (my word)' so soon after the glitch occurred. It makes me wonder how a company, with the technical expertise to find the supposed root cause of the problem in a recent software update so quickly, failed to catch the error prior to the software being installed ?!?

Re:Quick Catch - No Peer Review

[msobkow]

The four are probably the whole team responsible for that subsystem. So once the subsystem was identified, it was easy to point fingers.

Mistakes happen, though. That's something these HFT systems don't really allow for: there *will* be screwups in the code from time to time.

One would think they'd do a statistical analysis of the risk of touching an HFT module at least before rolling it out, and see if it's worth the gamble.

Silly me. Thinking instead of playing golf and "doing lunch" with the powers that be.

Blame the IT guy

[Compaqt]

Just another example of "blame the IT guy".

If it breaks, you don't fire the trader, the lawyer, CEO, VP, whoever. If you lose a billion dollars you don't jail Jon Corzine. If you gamble people's money, you get a golden parachute.

But if you're an IT guy, everything better be perfect, otherwise you'll get fired (lucky) or sent to jail (unlucky).

Re:Blame the IT guy

[kiwimate]

I suggest you read the article. It talks about a specific subset of trades that were affected due to a problem resulting from an upgrade. It further discusses the impact in a company which prides itself on risk management.

That would seem to imply that it is thought possible an IT upgrade was performed without adequate backout provisions or due diligence.

Re:Blame the IT guy

[Remus Shepherd]

This is why I didn't go into computer engineering as a young lad. I recognized that computers were tools, and the people trained to maintain and program them were going to end up as essentially service personnel. The high-level managers consider sysadmins to be one notch above a janitor. Shameful, but true. I realized this quite young.

Instead, I went into physics. I'm not appreciably higher in the corporate architecture, but what I do is so arcane nobody believes that I'm easily replaced. If sysadmins are treated like janitors, a scientist is treated like a skilled seamstress -- I'm still 'labor', but it costs so much to find someone who can do my job they're willing to cut me a little slack.

Re:Blame the IT guy

[jedidiah]

I had an uncle that tried to do that. Turned out that his physics degree was so esoteric that he had trouble finding a job.

He ended up being a produce clerk.

Re:Blame the IT guy

[TWiTfan]

It's tough to get a job as a teacher unless you got your education certification while you were getting your undergrad degree. As you point out there are some programs that make some VERY LIMITED exceptions. But even with those, you're always treated as a second-class teacher if you don't have certification. And it's hard to advance your career, get raises, or even keep your job until you get it.

You can't just walk into most primary/secondary schools in the U.S. and say "Hey, I'm a Ph.D. in physics and I'd like a job, please" and get it. You're not in the fraternity if you didn't go through the proper pledgeship.

Punishment Fits the Crime

[cookYourDog]

Wreck a few trades: Suspension! Wreck the global economy: Free federal loans and an even greater share of aggregate wealth!

Surprised Goldman didn't sic the FBI after them

[JoeyRox]

Losing money for Goldman is a federal crime, punishable by a 10 year sentence with no trial.

Re:administrative leave?

[Billly Gates]

Do these guys have contracts or something? Most of us are at-will hires. We don't get administrative leave, we get fired. Could also be that they have specialized knowledge and they are going to give them cash when they leave in exchange for transferring knowledge. The only time I have heard of 'administrative leave' is with government/union people. With at-will employment, you can be fired just because management feels like it.

As much as we love to bash big banking for looking at anyone not a pyschopath trader as a cost center, they need top talent.

Basically other slashdotters who work on these systems are on demands to change whole algorithms of the system within the hour by the traders whim with no QA, GET IT OUT FAST, but whoa if has a bug! You can't negotiate with these kinds of people who in their opinion generate real money and view themselves as supperior.

But they are not stupid and realize such great demands require a 6 figure salary, plus a bonus, plus being selective on a contract that the programmer will find more favorable. If they all said $12/hr take it or leave it and fire at will they will get crappy talent that could sink them fast. So the programmers here know the drill and the lack of job security so they negotiate it in a contract.

If you are in a job where your employer treats you like this then you are not valuable. Not to mean to insult as we all started out this way until we had to prove ourselves and or get a skill that made us more rare. Go find another employer who values your skills more if you have the experience by now or go do something about your skillset? Capitalism 101, both buyers and sellers will always take advantage of a weakness. If there are 10 folks begigng your job then your employer can do whatever the fuck he wants. If there are 10 jobs and you are the only one qualified, then you exploit the employers by walking if they do not offer you 6 figure salary, bonuses, own office etc.

why are we calling it this?

[nimbius]

Administrative leave is a temporary leave from a job assignment, with pay and benefits intact. Generally, the term is reserved for employees of non-business institutions such as schools, police, and hospitals.

this is an investment firm, with at-will employment. While im certain the glitch was of great concern to "investor confidence" this just feels like an absurd move to stifle any possibility of a negative market reaction, imaginary or concrete. If i were the IT guy being awarded this transition in employment, it would be difficult not to offer an ultimatum. That if, as its implied by the administrative leave, you in fact value me so much as a team member and employee, perhaps you should judge me by my past works and not by your board of directors insipid demand for job reassignment routinely applied to a police officer after she kills a suspect.
id also be more inclined to check across the street and see if any other investment firms might care to hire a coder.

Some are more equal than others.

[boorack]

Still, most of GS bad trades have been DK'ed. You see, for Goldman Sachs this is 'Heads we win, tails we win' kind of market. They're above the law in every respect. I'm curious what will happen to those tech folks. Will Goldman jail them in retaliation like they did with Aleynikov ? As much as they can call puppet US government to overturn their bad trades, they also can call govt to jail anyone they wish ...

Re:Some are more equal than others.

[timeOday]

Oh boy, you're right! Quoting the Wall Street Journal:

After sifting through each trade, exchanges canceled or adjusted many of the trades.

Their actions stanched what would have been an even more costly mistake. People familiar with the matter last week estimated that Goldman's losses could have reached hundreds of millions of dollars.

...

At NYSE Amex, the exchange will cancel trades in most cases of obvious error, unless the traders on both sides are market makers, or exchange members who facilitate the trading in a given stock's options to ensure fair and orderly markets. Goldman has a market-making unit, but in this case, NYSE Amex classified the orders as coming from a broker-dealer firm.

Re:Some are more equal than others.

[adolf]

It is thus proven: GS is both too big to fail, and too big to make mistakes.

Re:Some are more equal than others.

[quetzyg]

Oh boy, you're right! Quoting the Wall Street Journal:

After sifting through each trade, exchanges canceled or adjusted many of the trades.

Their actions stanched what would have been an even more costly mistake. People familiar with the matter last week estimated that Goldman's losses could have reached hundreds of millions of dollars.

...

At NYSE Amex, the exchange will cancel trades in most cases of obvious error, unless the traders on both sides are market makers, or exchange members who facilitate the trading in a given stock's options to ensure fair and orderly markets. Goldman has a market-making unit, but in this case, NYSE Amex classified the orders as coming from a broker-dealer firm.

Looks like someone at GS read yesterday's news about the The Greatest Keyboard Shortcut Ever and did a CTRL+Z on the trades.

Re:Some are more equal than others.

[similar_name]

It was CTRL+SHIFT+T. The T is for Trades. Control Shifty Trades.

Re:Are they pawns or are they the devs behind bug?

[RabidReindeer]

The disgusting criminals at the top sacrificing a few pawns.

Are they pawns or are they the developers responsible for the bug? Given the extremely high salaries devs working for wall street receive, didn't you think that there was a catch. i.e. if there is a bug that causes significant embarrassment or a significant loss of money you get fired.

If so the proceeding would seem fair. You want to name your price then your performance better be damn near flawless.

If you're a CEO and you get fired, they'll often pay you more to go away than most people will make in their entire lifetime. For example, Mattel had a loser CEO who managed to make their stock worth half of what it had been. His punishment? Well, he got fired. And paid $25million.

This whole idea that the C-level guys are somehow "earning" those massive benefits by being superhuman beings needs to die, be decapitated, have a stake driven through it, burned and scattered to the winds.

A good worker is valuable, no question. But there's an old management aphorism about what you're supposed to do to irreplaceable people. The reason they get away with it has less to do with the scarcity of their talents than it does with the fact that they have one of the tightest unions around.

Re:OT?

[lightknight]

"When large numbers of investors trade mutual funds in lockstep, it can force fund managers to buy and sell securities at inopportune times. They may have to find securities to buy in a hurry if the pack invests all at once, and may have to sell quickly to pay off sellers who cash out together."

Right...because when an average investor buys and sell securities at an inopportune time, it's totally cool, but when a fund manager has to do it....well, we can't have that.

Love this world to death: it has so many laws, so many rules, for so many different peoples, and they're all different! No two people abide by the same set of rules. God Himself would be proud.

Re:Are they pawns or are they the devs behind bug?

[lgw]

A CEO of large corporation is a professional entertainer. And just like a professional athlete, rock star, or top-billing Hollywood star, they get paid absurd amounts (actually, about the same as those) because people compete to hire them. Hollywood stars are probably the best comparison: few people can do the job, but still plenty more than there are jobs. But stars have followings, and their names bring credibility that helps projects get funding.