Knights trading algo vs NYSE RLP algo.
The result of Knights trading losses, a complete collapse.
Fortune on Knights trading activities
On Wednesday, the same day that Knight lost $440 million, the NYSE launched its own computer driven trading system, called the Retail Liquidity Program, that the exchange hopes will reclaim some of the trading volume it has lost to market makers. Like Knight, the NYSE's RLP computers use algorithms to figure out when it makes sense to offer a slightly better price than what others are offering, and snatch up stock trades, this time away from Knight and others.
It's likely that Knight tried to upgrade its own algorithm to allow its computers to do an end around the NYSE's new system. But it messed up somehow. Instead, Knight's computer system, launched at the same time as the NYSE's, went on a trading frenzy, buying and selling millions of shares for no reason shortly after both systems were switched on, at when the market opened at 9:30 Wednesday morning.
Earlier, Nanex on who benefits from sub-penny high frequency trading.
Tags: knights capital collapse, root cause of knights trading losses, knights trading vs nyse rlp