Algorithm glitch shuts down trading on Stockholm market

Algorithm glitch shuts down trading on Stockholm market

on Nov 28, 12 • by Chris Bubinas • with 1 Comment

The Stockholm Stock Exchange, which is operated by Nasdaq OMX, was forced to shut down derivative trading following an order for futures contracts worth 130 times the total of Sweden's ...

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The Stockholm Stock Exchange, which is operated by Nasdaq OMX, was forced to shut down derivative trading following an order for futures contracts worth 130 times the total of Sweden’s GDP, Investment Europe reported. The order was for more than 4.2 billion contracts of the OMXS30 December future, valued at 107,000 Swedish kroner (SEK), or approximately $16,000, for a total cost of nearly 460 trillion SEK, Sweden’s Svenska Dagbladet noted.

The market’s software system is supposed to filter out this type of abnormal request, but an error allowed the trade to find its way into the order book, according to Investment Europe. The exchange operator is carrying out an investigation and suspending derivative trading until it can identify the source of the problem.

One Swedish trader told Svenska Dagbladet that the incident shows the way that algorithmic securities trading can go “bananas.” The practice has come into the spotlight following an August glitch that caused Knight Capital to lose $440 million in half an hour due to errant automated trades and Wall Street’s 2010 “flash crash.”

As details from the Stockholm glitch continue to emerge, developers may want to take the opportunity to ask if they are taking steps such as using code analysis to minimize the likelihood of such an error occurring in their own systems.

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