New Flash Crash Blamee: Trading-Firms

The WSJ is reporting that Citadel Execution Services and Knight Capital Group both had technical problems just before the Ma 6th whoosh down.

Here’s the Journal:

“Their breakdowns could have strained a market already overloaded by an explosion of trading volume, possibly causing disorder to spread, interviews with market participants and exchange officials suggest.

Discount brokers said several trading venues they use experienced problems during the turmoil but that they didn’t disrupt clients’ ability to trade. “There were a number of different destinations that we had to reroute” orders away from, said TD Ameritrade spokeswoman Kim Hillyer.

“There were strains in the system,” said Greg Framke, E*Trade’s chief information officer. “If there were issues, we were dealing with them.”

At about 2:45 p.m., Citadel encountered problems with its order book that handles exchange-traded funds listed on NYSE Arca, the electronic exchange of NYSE Euronext Inc., according to a Citadel email to customers reviewed by The Wall Street Journal. Exchange-traded funds, or ETFs, are securities that trade on exchanges that represent a basket of stocks, for example tied to a sector or index.

At 2:57 p.m., Citadel sent the following email to clients: “We are currently experiencing Equity system issues. We are advising clients to please route away.”

Another piece to the puzzle that I expect we will eventually unwind . . .


Trading-Firm Breakdowns Accompanied Market Chaos
WSJ, May 20, 2010

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