The Other McCain

"One should either write ruthlessly what one believes to be the truth, or else shut up." — Arthur Koestler

I Just Don’t Buy The ‘Fat Finger’ Excuse

Posted on | May 8, 2010 | 14 Comments

by Smitty

Terry Jones on Front Page repeats the assertion that somebody hit ‘B’ when they meant ‘M’ and load-shed an awful lot of Proctor and Gamble, sending the Dow into Stuka mode. Jones then throws out the idea that there will be a ‘do over’ for these ‘accidental’ trades.

Something I’ve figured out in the time I’ve been doing information systems is that among the major goals is to protect the data from users and users from data. The amounts of money involved are staggering. The negative side effects for permitting noise data inputs are severe. We’re expected to believe that the system doesn’t require some sort of approval chain to make large-magnitude moves?

That said, every system implies a work-around. Somebody who wants faster reaction time may have all of the logins necessary to push an error through. If that’s the case, then the simple ‘fat finger’ story is oversimplified. The idea of a ‘do over’ rule being applied post-facto will have the effect of creating a new system, where traders will be tempted to see just how much jiggering the system will allow.

Via Insty, Coco Letterman is questioning the timing:

Obama’s financial reform measure languishing in Congress may actually have received a huge shot in the arm by this horrifying result. What an amazing coincidence. Hmmm.

“Wait a minute, Coco,” you’re probably wondering. “Are you hinting that the President of the United States, less than two weeks removed from coming down from Heaven and spending a day or two with us mortals in Quincy – on this very Earth – may possibly have had something sinister to do with the collapse on Wall Street on Thursday? Can you seriously be alleging the biggest point swing in the history of mankind’s investments was possibly done by this administration’s leaders?”

Yep.

Let me be clear. There is no known paper trail, and if this administration is half as smart as I think they are, there wouldn’t be one to find, either. But do I seriously think it’s within the wide, wide realm of possibilities that this administration helped manipulate this situation?

Absofreakinglutely.

Today, the Washington Post noted a quiescent tone from the GOP on Wall Street reform:

GOP senators are forging alliances with Democrats and voting against measures offered by fellow Republicans. They are trying to reshape a bill they don’t like the old-fashioned way — in an open process on the Senate floor.

“It is my hope that this bill will not only produce a good product at the end but also have the healing quality that this institution needs,” Senate banking committee Chairman Christopher J. Dodd (D-Conn.) said this week. “We’ve been through a lot this Congress, and we need to get back to acting like colleagues.”

There are no signs that Republicans have lost confidence in McConnell, acknowledged as a savvy inside operator even by his Democratic opponents. But the shift does signal that the just-say-no approach he employed until recently has its limits, particularly in an election year when voters are angry at both parties and appear to be gravitating to outsiders.

So, all those dots point to a diabolical collusion between regulators and traders in windowless offices. No, it doesn’t. Do I think there is significant ‘rest of the story’ that we’ll likely never know? Why yes; yes, I do.

When you’re designing and coding that user interface, you know that complexity is the devil. Simplicity and clarity are your friends. I can’t help but think that regulatory programs share an affinity with software in this regard.

Category: Economics

Comments

14 Responses to “I Just Don’t Buy The ‘Fat Finger’ Excuse”

  1. Rae
    May 9th, 2010 @ 12:20 am

    For your consideration:

    Where Was Goldman’s Supplementary Liquidity Provider Team Yesterday? A Recap Of Goldman’s Program Trading Monopoly
    http://www.zerohedge.com/article/where-was-goldmans-supplementary-liquidity-provider-team-yesterday-recap-goldmans-program-tr

    We have long claimed that Goldman is the de facto monopolist of the NYSE’s program trading platform. As such, it is certainly the case that Goldman was instrumental in either a) precipitating yesterday’s crash or b) not providing the critical liquidity which it is required to do, when the time came. There are no other options.

    Morning Update/ Market Thread 5/7
    Good Morning Crash Survivors…
    http://economicedge.blogspot.com/2010/05/morning-update-market-thread-57.html

    The decline yesterday was very serious even before the crash. This was on concerns about Greece and about contagion. Sorry, the contagion already occurred when the central bankers pressed their debt and derivatives around the globe – too late.

    Then comes in Harry Reid who talked up the Audit the Fed bill and said that it looked like the provisions to break up the big banks would come to vote. Now let me ask you this… who is it that owns, holds, or controls the vast majority of stock and the vast majority of trading computers? Who is it that actually produces and controls the money in this country and around the globe? The same people, the same entities? YES!

    If you were being attacked and told that you were going to be broken up, what would you do? You would do the same thing that central bankers have done for centuries throughout history, you would crash the markets in a not so subtle hint to leave them alone. This is about power and control, do not be fooled.

  2. Rae
    May 8th, 2010 @ 7:20 pm

    For your consideration:

    Where Was Goldman’s Supplementary Liquidity Provider Team Yesterday? A Recap Of Goldman’s Program Trading Monopoly
    http://www.zerohedge.com/article/where-was-goldmans-supplementary-liquidity-provider-team-yesterday-recap-goldmans-program-tr

    We have long claimed that Goldman is the de facto monopolist of the NYSE’s program trading platform. As such, it is certainly the case that Goldman was instrumental in either a) precipitating yesterday’s crash or b) not providing the critical liquidity which it is required to do, when the time came. There are no other options.

    Morning Update/ Market Thread 5/7
    Good Morning Crash Survivors…
    http://economicedge.blogspot.com/2010/05/morning-update-market-thread-57.html

    The decline yesterday was very serious even before the crash. This was on concerns about Greece and about contagion. Sorry, the contagion already occurred when the central bankers pressed their debt and derivatives around the globe – too late.

    Then comes in Harry Reid who talked up the Audit the Fed bill and said that it looked like the provisions to break up the big banks would come to vote. Now let me ask you this… who is it that owns, holds, or controls the vast majority of stock and the vast majority of trading computers? Who is it that actually produces and controls the money in this country and around the globe? The same people, the same entities? YES!

    If you were being attacked and told that you were going to be broken up, what would you do? You would do the same thing that central bankers have done for centuries throughout history, you would crash the markets in a not so subtle hint to leave them alone. This is about power and control, do not be fooled.

  3. KG
    May 9th, 2010 @ 12:36 am

    2 words: George Soros.

  4. KG
    May 8th, 2010 @ 7:36 pm

    2 words: George Soros.

  5. smitty
    May 9th, 2010 @ 12:47 am

    @KG,
    Oh, yeah: Warren Buffet.
    The question is not: ‘Can we demonize people by name?’ Rather, ‘What can we do within the realm of the free market to excite competition?’

  6. smitty
    May 8th, 2010 @ 7:47 pm

    @KG,
    Oh, yeah: Warren Buffet.
    The question is not: ‘Can we demonize people by name?’ Rather, ‘What can we do within the realm of the free market to excite competition?’

  7. The Javelineer
    May 9th, 2010 @ 5:02 am

    The stock market, metals markets, and oil markets are captured.

    The government is empowered to engage in unlimited and secret stock and commodity trades, with taxpayer money. They can make the markets do whatever they want. They can crush your market positions at will. They can manipulate prices.

    Hedge funds and so-called “investment banks” purchase rights to install high-frequency trading systems. These systems receive market data in serial fashion. Computers in front get a small time advantage over computers farther back in line. The everyday trader is dead last, moving at human speed. It’s a billion dollar a week market manipulation scam. It’s been around for over a decade.

    There is no free market left in this country. Bankers collude with the government. They’ve taken control of every important market.

    Remember the fascist slogan? Everything in the state; nothing outside the state; nothing against the state. We’re almost there.

  8. The Javelineer
    May 9th, 2010 @ 12:02 am

    The stock market, metals markets, and oil markets are captured.

    The government is empowered to engage in unlimited and secret stock and commodity trades, with taxpayer money. They can make the markets do whatever they want. They can crush your market positions at will. They can manipulate prices.

    Hedge funds and so-called “investment banks” purchase rights to install high-frequency trading systems. These systems receive market data in serial fashion. Computers in front get a small time advantage over computers farther back in line. The everyday trader is dead last, moving at human speed. It’s a billion dollar a week market manipulation scam. It’s been around for over a decade.

    There is no free market left in this country. Bankers collude with the government. They’ve taken control of every important market.

    Remember the fascist slogan? Everything in the state; nothing outside the state; nothing against the state. We’re almost there.

  9. Estragon
    May 9th, 2010 @ 6:36 am

    Folks, we are treading into the tin-foil hat aisle here – free scanning for implanted microchips this weekend!

    Occam’s Razor suggests simpler explanations merit higher priority.

    It is an excellent example of the fallibility of our systems and regulatory regime, which have been redesigned several times, always assuring us this sort of crap can’t happen.

    Hey, those SEC regs after Enron would ensure there would never be a Lehmann Brothers collapse, wouldn’t they?

  10. Estragon
    May 9th, 2010 @ 1:36 am

    Folks, we are treading into the tin-foil hat aisle here – free scanning for implanted microchips this weekend!

    Occam’s Razor suggests simpler explanations merit higher priority.

    It is an excellent example of the fallibility of our systems and regulatory regime, which have been redesigned several times, always assuring us this sort of crap can’t happen.

    Hey, those SEC regs after Enron would ensure there would never be a Lehmann Brothers collapse, wouldn’t they?

  11. jenn
    May 9th, 2010 @ 1:08 pm

    Hey, those SEC regs after Enron would ensure there would never be a Lehmann Brothers collapse, wouldn’t they?

    Actually they didn’t. The commodity futures trading commission tried to regulate the market in CDOs and congress after lobbying from the banks passed a law specifically prohibiting it.

    People can push the Fannie and Freddie meme but it was really the inability to meet obligations imposed by the CDOs that crashed the system.

    I also disagree with Smitty about the likelihood of user error. In my experience users usually just click through the confirmation dialog. I have seen it happen all the time at work when someone does something like change a trace routing and the layout tool warns them its out of parameters. They click through anyway and then have to go back and rectify the mistake when it gets caught on a schematic review a couple weeks later (or as happened one time we end up scrapping a prototype run because the mistake actually slips through). The person responsible feels sheepish for a while and is extra careful until he starts getting overwhelmed by dialog boxes again and then the automatic click throughs start again.

  12. jenn
    May 9th, 2010 @ 8:08 am

    Hey, those SEC regs after Enron would ensure there would never be a Lehmann Brothers collapse, wouldn’t they?

    Actually they didn’t. The commodity futures trading commission tried to regulate the market in CDOs and congress after lobbying from the banks passed a law specifically prohibiting it.

    People can push the Fannie and Freddie meme but it was really the inability to meet obligations imposed by the CDOs that crashed the system.

    I also disagree with Smitty about the likelihood of user error. In my experience users usually just click through the confirmation dialog. I have seen it happen all the time at work when someone does something like change a trace routing and the layout tool warns them its out of parameters. They click through anyway and then have to go back and rectify the mistake when it gets caught on a schematic review a couple weeks later (or as happened one time we end up scrapping a prototype run because the mistake actually slips through). The person responsible feels sheepish for a while and is extra careful until he starts getting overwhelmed by dialog boxes again and then the automatic click throughs start again.

  13. The Javelineer
    May 9th, 2010 @ 10:25 pm

    Estragon wrote, “Folks, we are treading into the tin-foil hat aisle here – free scanning for implanted microchips this weekend! Occam’s Razor suggests simpler explanations merit higher priority.”

    Occam’s Razor is a logical guideline for the construction of theories. It’s not useful for choosing between competing theories. Truth is the criteria for that. Duh.

    The existence of the mafia was once a conspiracy theory, denied by the feds, and ridiculed by people like you. Lots of people were stupid enough to believe the government instead of the plain evidence in the newspapers. The propaganda method of riducule works on the vain and the feeble.

    CME Group says, “While our policy is not to comment on individual participation in our markets, in light of volatile market conditions, CME Group confirmed that activity by Citigroup Global Markets Inc. in CME Group stock index futures markets does not appear to be irregular or unusual in light of market activity today.” Google the press release.

    There was no “fat finger” trade.

    You’ve a nasty nick from Occam’s Razor, Estragon.

  14. The Javelineer
    May 9th, 2010 @ 5:25 pm

    Estragon wrote, “Folks, we are treading into the tin-foil hat aisle here – free scanning for implanted microchips this weekend! Occam’s Razor suggests simpler explanations merit higher priority.”

    Occam’s Razor is a logical guideline for the construction of theories. It’s not useful for choosing between competing theories. Truth is the criteria for that. Duh.

    The existence of the mafia was once a conspiracy theory, denied by the feds, and ridiculed by people like you. Lots of people were stupid enough to believe the government instead of the plain evidence in the newspapers. The propaganda method of riducule works on the vain and the feeble.

    CME Group says, “While our policy is not to comment on individual participation in our markets, in light of volatile market conditions, CME Group confirmed that activity by Citigroup Global Markets Inc. in CME Group stock index futures markets does not appear to be irregular or unusual in light of market activity today.” Google the press release.

    There was no “fat finger” trade.

    You’ve a nasty nick from Occam’s Razor, Estragon.