Trading Systems Broke During 'Flash Crash': Report

Thursday, 20 May 2010 01:17 PM

 

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Trading systems briefly broke down at hedge fund firm Citadel Investment Group and trading firm Knight Capital Group when the stock markets plunged on May 6, the Wall Street Journal reported.

Citadel stopped taking orders for a number of securities, soon after the record fall, the Journal reported, citing an internal email and people familiar with the matter.

Citadel had asked clients to route orders elsewhere, the paper reported.

Electronic trading service provider Knight Capital was so flooded with orders that one of its computers "just blew up," the paper reported, citing a person familiar with the matter.

The breakdown led to a slight delay in handling orders and affected less than 1 percent of the Knight Capital's orders, the person said.

Citadel and Knight Capital could not immediately be reached for comment by Reuters outside regular U.S. business hours.

In the first quarter of 2010, Knight executed more than 225 million trades, which is an average of 3.7 million trades per day, according to its website.

Citadel's trading arm — Citadel Execution Services — executes and routes over 600,000 equity trades, 500 million equity shares and 1.2 million retail options contracts per day on average, its website showed.

On May 6, the stock markets witnessed an unprecedented plunge with benchmark index Dow Jones falling almost 1,000 points before recovering a little while later.

In the wake of the crash, Nasdaq OMX Group Group cancelled more than 10,000 erroneous trades after hundreds of stocks and exchange-traded funds lost as much as 99 percent of their value and then fully recovered in a 20-minute period.

© 2014 Thomson/Reuters. All rights reserved.

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