Confidence in electronic trading suffers.
Bloomberg News has reported that a programming error at Goldman Sachs Group caused unintended stock-option orders to flood American exchanges this morning, roiling markets and shaking confidence in electronic trading infrastructure.
An internal system that Goldman Sachs uses to help prepare to meet market demand for equity options inadvertently produced orders with inaccurate price limits and sent them to exchanges, said a person familiar with the situation, who asked not to be named because the information is private. The size of the losses depends on which trades are cancelled, the person said. Some have already been voided, data compiled by Bloomberg show.
The mishap comes about a year after computers run by Knight Capital Group flooded U.S. equity markets with erroneous orders, a mistake that almost put the market-making firm out of business. Goldman’s error is fuel for critics of America’s electronic market structure, coming four months after the Chicago Board Options Exchange was shut down for three and a half hours by a computer malfunction.
'This unfortunately was an error, and in the financial world an error can be a million-dollar error,' Chip Hendon, the Cincinnati-based senior fund manager at Huntington Asset Management, said in a telephone interview. His firm oversees $16bn. 'You can use the computer, but there has to be that human touch as well to try and catch errors.'
To access the complete Bloomberg article hit the link below
Previous HITC reports of interest
Check out some other high-profile cases of 'fat finger trade' reported by HITC including when CitiGroup were fined $30,000 by Australian securities regulator which caused the share price of a stock to fall 99%, and when the Dow Jones Industrial Average fell by almost 1000 points but recovered 700 points in a matter of minutes on a late afternoon's worth of trading three years ago, with the Dow Jones closing down 3.2% on that day.
For additional reaction to the Goldman Sachs error hit the link to the New York Post article below