http://www.bloomberg.com/news/2013-08-21/goldman-options-error-shows-peril-persists-one-year-after-knight.html
For all the efforts to shore up electronic markets in the aftermath of one of America’s biggest trading catastrophes, yesterday’s options malfunction by Goldman Sachs (GS) Group Inc. shows the dangers haven’t gone away.
A programming error caused the firm to send unintentional stock options orders in the first minutes of trading, pushing prices on dozens of contracts to a dollar each, according to a person briefed on the matter yesterday and data compiled by Bloomberg. Any losses for Goldman Sachs, the fifth-largest U.S. bank by assets, won’t be known until exchanges determine which contracts should be canceled, said the person, who requested anonymity because the information is private.
Investors who fret about the increasing dominance of electronic exchanges say the error at Goldman Sachs, which generated about half its revenue from trading last quarter, shows that worse breakdowns are inevitable. A year ago, Knight Capital Group Inc. was pushed to the brink of bankruptcy by a trading breakdown, and Chinese regulators are investigating broker Everbright Securities Co. after $3.8 billion of incorrect buy orders sent the Shanghai Composite Index (SHCOMP) up about 6 percent in two minutes last week.
“It can happen to anybody, no firm is immune,” Matt McCormick, who helps oversee $9.6 billion as a money manager at Cincinnati-based Bahl & Gaynor Inc., said in a phone interview. “Because it’s Goldman Sachs, the error could be pretty large.”
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