4 ms·

They were asleep at the wheel, not unlike all the random brokerages that blew up when swiss central bank pulled the CHF peg in 2015. This is a culture problem

by pxmpxm 3y ago

They were asleep at the wheel, not unlike all the random brokerages that blew up when swiss central bank pulled the CHF peg in 2015. This is a culture problem - as soon as you load up your trading firm with a bunch of software industry hires, you end up with jiras and change management workflows instead of people on deck that have context for what they're doing. That's the only way to explain reverse scalping for 45 mins straight.

ycombobreaker 3y ago
The CHF de-peg wasn't really technology risk. Brokers lost money because they undervalued CHF/EUR risk, undervalued liquidity risk (stop orders were executing FAR worse than expected, or simply failing to execute at all), and didn't pay attention to the legal protections afforded to their customers (customer balances went negative but there was no way to recover that money from the customers). These brokers would have had the same problems even if using pen & paper, they failed to plan (or alternatively, made a conscious bet and lost).
- throwaway2037 3y ago
  I think it is worth saying that no one saw that de-peg coming. Absolutely no one. Sure there are some crazies who saw it coming, but that same camp is still taking for the HKD-USD de-peg. It was a shock to everyone on Wall Street. I am a bit surprised that the Swiss National Bank didn't tip off their own banks before doing it. Both UBS and Credit Suisse were seriously caught off guard when it happened.
  - deleted 3y ago
    [deleted]
  - ycombobreaker 3y ago
    That's fair. I wasn't close enough to see how "surprising" it was. The point stands that it looks nothing like HFT active trading risk. Knight Capital created such amazing training material for the industry. What went wrong with their software, how many decisions or practices could have prevented or narrowed the risk. What went wrong at trade time, how they had a clear window to pull the plug but died due to indecision and inaction.
jwestbury 3y ago
> as soon as you load up your trading firm with a bunch of software industry hires As a software industry hire at a hedge fund right now... I'd love to see more cross-pollination, because there are so many good things happening on both sides, and so many terrible things happening through just a sheer lack of knowledge. Change management workflows are great and should be used more in finance. But software companies should implement andon cord systems more often (Amazon does; nowhere else I've worked gives that power to anybody at the company).
- Game_Ender 3y ago
  > andon cord systems more often What did you mean by this? Do you mean a way to disable systems at the flick of a switch, like dynamic feature flags?
  - mplewis 3y ago
    Anyone is allowed to pull the red cord and stop the proverbial production line at any time when something is wrong and needs to be fixed.

by pxmpxm 3y ago

ycombobreaker 3y ago

The CHF de-peg wasn't really technology risk. Brokers lost money because they undervalued CHF/EUR risk, undervalued liquidity risk (stop orders were executing FAR worse than expected, or simply failing to execute at all), and didn't pay attention to the legal protections afforded to their customers (customer balances went negative but there was no way to recover that money from the customers). These brokers would have had the same problems even if using pen & paper, they failed to plan (or alternatively, made a conscious bet and lost).

throwaway2037 3y ago
I think it is worth saying that no one saw that de-peg coming. Absolutely no one. Sure there are some crazies who saw it coming, but that same camp is still taking for the HKD-USD de-peg. It was a shock to everyone on Wall Street. I am a bit surprised that the Swiss National Bank didn't tip off their own banks before doing it. Both UBS and Credit Suisse were seriously caught off guard when it happened.
- deleted 3y ago
  [deleted]
- ycombobreaker 3y ago
  That's fair. I wasn't close enough to see how "surprising" it was. The point stands that it looks nothing like HFT active trading risk. Knight Capital created such amazing training material for the industry. What went wrong with their software, how many decisions or practices could have prevented or narrowed the risk. What went wrong at trade time, how they had a clear window to pull the plug but died due to indecision and inaction.

jwestbury 3y ago

> as soon as you load up your trading firm with a bunch of software industry hires As a software industry hire at a hedge fund right now... I'd love to see more cross-pollination, because there are so many good things happening on both sides, and so many terrible things happening through just a sheer lack of knowledge. Change management workflows are great and should be used more in finance. But software companies should implement andon cord systems more often (Amazon does; nowhere else I've worked gives that power to anybody at the company).

Game_Ender 3y ago
> andon cord systems more often What did you mean by this? Do you mean a way to disable systems at the flick of a switch, like dynamic feature flags?
- mplewis 3y ago
  Anyone is allowed to pull the red cord and stop the proverbial production line at any time when something is wrong and needs to be fixed.