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// Knight lost half a billion dollars in 30 seconds. Nobody reversed though, even though it was clear error. You cited Knight twice in this thread, and it's ju
by xyzelement 5y ago
// Knight lost half a billion dollars in 30 seconds. Nobody reversed though, even though it was clear error.
You cited Knight twice in this thread, and it's just not the same concept. I think your point is that people should accept irreversible transactions in whole because there are some edge cases where they exist today, and that just doesn't make sense.
First, there's a difference between an average person and Knight in the degree of sophistication of tools that they can wield. So the fact that Knight is allowed to operate like this is in no way connected to whether this mode should be the default for an average person.
Second, the Knight example can be interpreted as an exception that proves the rule. They had an unforced error that (from what I recall) looked to the rest of the world like real trading. But there's a whole other slew of issues (clearly bad prices, exchange-errors, etc) that cause trades to be unwound. Some exciting reading if you care: https://www.investopedia.com/terms/e/erroneous-trade.asp https://www.investopedia.com/terms/e/erroneous-trade.asp
You have a point that yes to some extent we're all subject to underlying risk of irreversible activity but the bigger point is that we as society try to minimize it where possible. So moving the system in the other direction, especially where it makes it easy for Joe-Blow to fuck it up, is not the way.
- dcolkitt 5y agoThere’s no categorical difference between Knight and Vanguard. If Vanguard fucks up its trading, the exchange is not under any obligation to make it right. The only difference is that Knight was a lot more aggressive in terms of pushing the envelope on its algorithms to reap excess profit. I’m sure Vanguard is a lot more politically sympathetic, but I’d trust that “guarantee” a hell of a lot less than I’d trust battle tested software. Say the fund managers running your 401k decided to say “fuck it, turn off all the circuit breakers.” Would you just shrug your shoulders and say “no worries, I’m sure FINRA’s got my back if anything goes wrong. Blindly trusting the people running institutions to keep you safe is as misguided as assuming that all software is infallible .
- xyzelement 5y agoI agree with the individual bits of data but I don't agree with your ultimate conclusion. The point is - do you aim to make the system fixable by human judgement or not? This thread is full of examples we like: the credit card protecting us from fraudulent charges, FDIC insurance, etc. Are there places in our life that society is forced to operate without such backstops? Yes. But we want to minimize, not maximize those - especially when it comes to consumer-facing capabilities.