Technology glitches mar stock exchange executions
Over on FierceFinanceIT, I've often discussed the near-epidemic of software bugs that have had consequences both merely annoying and life altering.
This week, the nation's third-largest stock exchange operator, BATS, alerted its customers that a programming error resulted in 435,000 trades being executed at the wrong price over the last four years. The cost was minimal, $420,000, but the implications are huge in terms of market structure and the NBBO.
he New York Times offs a run-down of other incidents, noting that, "A day earlier, the trading software used by the National Stock Exchange stopped functioning properly for nearly an hour, forcing other exchanges to divert trades around it. The New York Stock Exchange, the nation's largest exchange, has had two similar, though shorter-lived, breakdowns since Christmas and two separate problems with its data reporting system. And traders were left in the dark on Jan. 3 after the reporting system for stocks listed on the Nasdaq exchange, the second-biggest exchange, broke down for nearly 15 minutes."
There are large market structure implications to all these problems. At the same time, one could view them as a simple exercise in software quality assurance. The code has got to be pristine before it is loaded onto the national market system. The SEC has taken up the issue, levying increasing fines.
In October, it put together an expert panel that came up with some recommendations, including adopting some sort of kill switch at the exchange level to contain problems. The roundtable was set up in response to a string of incidents, notably the Knight Capital fiasco that resulted in a $440 million loss in less than an hour---and ultimately the sale of the company. This will likely remain an issue this year.
- here's the overview from the Times
BATS reveals NBBO pricing problems