High-frequency trading: The fast and the furious | The Economist
“The NYMEX panel found that Infinium had finished writing the algorithm only the day before it introduced it to the market, and had tested it for only a couple of hours in a simulated trading environment to see how it would perform. The firm’s normal testing processes take six to eight weeks. When the algorithm started its frenetic buying spree, the measures designed to shut it down automatically did not work. One was supposed to turn the system off if a maximum order size was breached, but because the machine was placing lots of small orders rather than a single big one the shutdown was not triggered. The other measure was meant to prevent Infinium from selling or buying more than a certain number of contracts, but because of an error in the way the rogue algorithm had been written, this, too, failed to spot a problem.”
(tags: hft automation trading markets stocks nymex bugs software)