Knight Capital has reached a $12 million settlement with US regulators over a technology meltdown which caused market chaos and drove the firm to the brink of bankruptcy.
According to this article, the root cause for that Knight Capital incident was failing business logic within a router. A router is a communications device, putting critical business logic there is a sign of a pretty strange IT architecture.
One can understand that the recently prevailing HFT frenzy with the perceived need for extreme speed and somewhat less focus on reliability could have led to such a strange design. But regulators are now starting to again put more focus on the reliability
of exchange systems, as can be seen from a programmatic speech by Mary Jo White, head of the SEC. A short excerpt:
"I met with executives of the exchanges last month and challenged them to together develop and implement the necessary steps to improve the resilience of the technology surrounding critical market infrastructures. In short order, we expect to receive comprehensive
action plans that address the standards necessary to establish highly resilient and robust systems for securities information processors. I have also asked the SEC staff to engage the exchanges, clearing agencies, and FINRA to conduct a “mapping” of other
critical infrastructure systems and provide assessments of their robustness and resilience."
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