if by trading professionals, you lump everything from technical analysis moms basement fags and wholesale trading operations together, then you might be somewhat correct.
I was unclear in my wordiness. What I meant is the over-the-counter traders who founded Knight.
One sentence ago they were hft. totally different kind of game.
I never called Knight "HFT". But it's plain to see they were undone by HFT.
What's not plain to see, and central to my post, is Knight's trading culture. I have a little insight to it that I thought I'd share. I don't know why this makes you feel entitled to be a dick about it.
So a scenario exists where some rogue trader totally ignores the fact that his job is to prototype in matlab and cant even trade any significant volume ?Remember when you were talking about hft? thats c++ territory. Traders make fun of IT fags. they dont try to play their game.
Rogue trader? Please elaborate.
Let's deal with what we know from early reports: that a new software misfired. That is what happened.
Those firms employ the best of the best developers. You trying to tell us that a couple twitter hipsters wouldve saved them?
Knight fucked up royally. This was not a trader's error - it was an programming error on an unprecedented scale. The best developers money could employ apparently scored a Negative-Zero-F-Minus-Tucked-Into-A-Shit-Pie.
What I surmise that the roots of this error may lie in its culture. Knight was founded by the best of the best wholesalers, guys who learned the over-the-counter game in the 80s, where through guile and a telephone they could sniff out whether larger players were buyers or sellers in a name and then run ahead of orders. They were doing manually and in minutes what many accuse HFT programs of doing in nanoseconds.
So Knight's founders (I refuse to Google facts for anything I'm going write in this thread, okay? I have no interest in becoming the Champion of Wickedfire.) were not IT people - and therefore susceptible to mistakes in judgment that a HFT-only firm might not be. That's only my speculation.
Yea. Thats totally weird. You know, if obama paid this healthcare scheme out of his own pocket, nobody would care.
Hipsters and Obama have nothing to do with anything with this story.
Weve already figured that out from the first paragraph.
What is your fucking problem?
Considering that they are market makers and thus ideally not taking any kind of position, a lot.
You really thought that just because Knight was a market maker, they make so much that $440 million can walk out the door and they still have a lot of capital left???
Were back to them being market makers. But you seem to not really get what a market maker does.
Jesus, while you don't need help insulting people out of the blue, you could brush up on your reading comprehension.
HFT is not a business, it's just trading. Market making is also trading: 100% of the time, okay? But it's trading as a dealer, a market maker is there as both buyer/seller ("the other side", if you will) to the public.
Literally a market maker makes markets. Knight will register with the SEC, etc. to buy and sell WXYZ to the public. Knight then has both the free reign to set a buy/sell price the issue within a predetermined range of the last sell and the responsibility of being good for a certain amount, I believe it's usually 100 shares, it used to be 1000, before it can reset its prices to a different level.
The worst case scenario for a market maker is that he loses a couple tenths of a percentage point. the best case scenario is that he wins a couple tenths of a percentage point.
I guess the second worst case scenario is losing $440 million on shitty software.
By the way, Knight lost $30-40 million, so my earlier "worst case" scenario was way off. But, then again, I'm sharing what I know, not pretending to be an expert.
I can obviously only speculate here, but the reason they lose significant amounts of money is that they werent able to fully delta hedge their position by the market closing and were out of the money overnight.
pewep would have trouble writing something more ridiculous.
