No safe default, 2012
Forty-five minutes, $440 million.
- What it cost
- Knight needed an emergency rescue from investors and was soon merged into another firm.
- The lesson
- Not an attack. Unexpected behaviour with no safe default and no kill switch is what mishandled conditions cost.
Read the full story and sources
On 1 August 2012, a software update left old, unused code active on one of Knight Capital's eight trading servers. When markets opened, it began sending huge numbers of unintended orders. Warning emails went out but weren't acted on, and there was no quick way to stop it. In about 45 minutes the firm lost around $440 million.
Knight needed an emergency rescue from investors and was soon merged into another firm. In 2013 the US SEC fined it $12 million for lacking adequate controls.
Sources: US Securities and Exchange Commission order (October 2013), press coverage.