Knight Capital should receive time-out for trading errors

1 millisecond snapshot of trading algorithm gone mad with prices ping-ponging upwards. Credit: zerohedge.com

The recent debacle with Knight Capital, where they apparently rushed an untested new trading algorithm to market without rigorous testing first, caused the company to lose $400 million in just a few minutes. The stock market reacted by going higher because the trading platform was pushing prices higher (even as it lost money on each trade) until market circuit breakers were tripped, and the NYSE pulled the plug.

As much as possible, companies like Knight should simply be banned from trading until they prove they and their computer programs can act like responsible adults.

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