Rolling back the trades might appear to be a good way to solve this, and it is certainly an interesting database exercise to apply it to the trading markets. But it encourages the core flaw in the system, which is that the trades are promises, not real trades.
As the system is based on layers of credit - promises to settle trades as good at some later time - these sort of events will continue to happen.
The solution that will be applied is the superficial one - more and more patches on the existing patchwork. E.g., the NASDAQ clause that allows them to reverse bad orders will be revisited, and additional clauses added to it.
The "real" solution is just that: make all trades real. This is called real trade gross settlement, or RTGS. In such a system, a real trade would have stopped the problem cold when the program ran out of shares to sell at the wrong price. This would have hurt the trader, but nobody else.
This is all based on the techniques of financial cryptography. Recall the old Chaumian digital cash? think shares trading done with real time digital cash, more or less.
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Rolling back the trades might appear to be a good way to solve this, and it is certainly an interesting database exercise to apply it to the trading markets. But it encourages the core flaw in the system, which is that the trades are promises, not real trades.
As the system is based on layers of credit - promises to settle trades as good at some later time - these sort of events will continue to happen.
The solution that will be applied is the superficial one - more and more patches on the existing patchwork. E.g., the NASDAQ clause that allows them to reverse bad orders will be revisited, and additional clauses added to it.
The "real" solution is just that: make all trades real. This is called real trade gross settlement, or RTGS. In such a system, a real trade would have stopped the problem cold when the program ran out of shares to sell at the wrong price. This would have hurt the trader, but nobody else.
This is all based on the techniques of financial cryptography. Recall the old Chaumian digital cash? think shares trading done with real time digital cash, more or less.