Knight Capital losses spur focus on algo risk management

A meat cleaver cutting through the word losses

- Clive Davidson
- 06 Sep 2012

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When a rogue algorithm racked up $440 million in losses for Knight Capital on August 1, other firms involved in automated trading looked in the mirror. “Management wanted to know whether the same thing could happen here,” says the head of electronic trading at one large UK bank, wearily. “So we reviewed the controls, double-checked our monitoring processes and came to the conclusion that it couldn’t.”

Knight Capital probably thought the same. The firm was no algorithmic novice, nor was it

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