Use of Big Data in Communication with Customers

Different problems with one motto--- stopping stock exchanges with massive losses

Investing and trading is one of the tools for increasing the amount of equity capital. Exchanges make it possible to use them. In most cases, all work is done digitally, and the exchanges themselves are extremely resistant to negative external factors. But still, crashes do happen sometimes. The most interesting of them are below.

How the Power Peg algorithm led to a loss of $ 400 million

Probably, this is one of the most famous cases of loss of huge funds on the stock exchange due to software.

The Knight Capital Group, founded in 1995 has earned several billion US dollars in a couple of decades. And the company lost almost all this money in just 45 minutes. The reason is the unfinished software that Knight Capital Group used for trading.

The company has introduced new software for trading automation. But the management of Knight Capital Group was in a hurry, and because of this, not all servers received the update. Moreover, neither the new nor the old software had a "red button" that would allow trading to be stopped immediately. In the end, several hundred million dollars simply evaporated.

And it wasn't just the new software that was the problem. The main loss was brought by the Power Peg algorithm. It was a test system that worked on the "buy at the highest price, sell at the lowest price" principle, with no limit on the volume of transactions.

Until the problem was discovered, until we got to the reasons - half an hour passed. Then - another 15 minutes. As a result, during this time, 4 million transactions were carried out with 397 million shares of 154 companies. $ 6.5 billion was involved in problem operations - a huge amount. And to the losses was added a $ 12 million fine from the Securities Commission.

If you do not want to find yourself in a similar situation, trust reliable suppliers and experts in the field of trading software development.

Hacking the US Securities and Exchange Commission

The SEC (Securities and Exchange Commission) is one of the most formidable regulatory organizations in America for large companies. It was they who prevented the creator of Facebook from releasing their cryptocurrency.

The Commission's cyber defense is not as formidable as the organization itself. In 2017, cybercriminals hacked into the SEC's corporate database, stealing information valuable to traders. The hack was carried out back in 2016, and cybercriminals used the stolen information for about a year.

According to the SEC itself, which stores a huge amount of confidential information about current or future trading participants, hackers were able to find a vulnerability in the exchange's security software.

Power outage and suspension of trading on the Sydney Exchange

Sometimes a power outage is enough to stop even very reliable systems from working. It was because of this unexpected problem that the Sydney Stock Exchange stopped trading in March 2009. Then the blackout was very large-scale - almost 100 thousand houses and office buildings were left without electricity. One of them was the Sydney Stock Exchange.

There was no electricity for several hours, and during this time, complete chaos ensued in Sydney - the life of the city came to a standstill. But the participants of the exchange, who were unable to realize their plans for the day, suffered especially.

Failure to update software and stop the Australian Stock Exchange

And here already there were problems with the software of the Australian Stock Exchange. In 2020, trading had to be stopped shortly after the opening, as there were serious problems with the software update.

Then the representatives of the exchange closed trading for the whole day. Shortly after the shutdown, the exchange announced that, together with representatives of the Nasdaq, the problem had been localized. The fact is that on the weekend before the unsuccessful trading, it was Nasdaq who worked with the Australian Stock Exchange software, installing the latest generation of their trading systems.

Despite the fact that the software was thoroughly tested, both offline and under load, something went wrong. And the exchange had to stop trading for a whole day. Work resumed only the next morning.

Error in trading on the Shanghai Stock Exchange

And this is the problem of 2013 - then the erroneous actions of Everbright Securities led to a jump in the index of the exchange itself by 5%. At the same time, the mistake itself consisted in the acquisition of securities worth $ 3.8 billion. The company claims that it was not going to buy securities for such a large amount.

The problem here, as it turned out, was not in the human factor, but in the electronic systems of the affected company. The total amount of losses amounted to $ 31 million. The company's activities on the Shanghai Stock Exchange were suspended for 3 months, and it was going to achieve the cancellation of at least part of the erroneous operations.

But it is not known whether it managed to do it or not.

Is it possible to make the exchanges fall, bring them down?

It depends on what is meant by "bring down". If this means suspension of trading for some time, as we see, it is quite possible. Of course, exchanges are constantly improving protective measures, but there are always some vulnerabilities, albeit difficult to exploit.

But even if attackers decide to use them to crash a large exchange, nothing will work. The fact is that in the event of a strong drop in quotations, trading is simply suspended, and all transactions for the problem day are considered canceled. The minimum threshold for the suspension of trading is 7%, then - 13% and 20%.

Perhaps someday someone will be able to create an artificial "perfect storm" that will bury one or more exchanges under itself, but this is extremely unlikely.

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