It happened again on Wednesday. A High Frequency Trading (HFT) proprietary algorithm crafted by highly compensated brains-on-sticks and nurtured in the bowels of an investment bank escaped into the wild. From its carefully co-located massively parallel high speed trading computer it emerged to wreak havoc on the financial markets. In this case, it was a happy ending. The algo turned on its master and sucked the very life blood out of the firm that deployed it.
The incident is yet another lights-flashing, klaxon-blaring warning signal that competing HFT algorithms operating with the speed, size and complexity that are commonplace today cannot be adequately regulated, tested, or managed. Their interactions with each other cannot even be understood or predicted.
Wednesday 8-1-12: The Knight Capital Algo Clusterfrack
