Knight Capital Failure Due to Development Bug

On 1st August 2012, a trading firm that goes by the name of Knight Capital lost $440 million due to what they refer to as a "trading glitch." The example of Knight Capital is of particular interest because it took the company 17 years of hard work to build itself, but it went almost bankrupt in roughly 45 minutes. A simple software update caused Knight Capital to lose 75%“Knight Capital Group.” Wikipedia. Wikimedia Foundation, November 18, 2022. https://en.wikipedia.org/wiki/Knight_Capital_Group. of its value in merely 48 hoursWikipedia: https://en.wikipedia.org/wiki/Knight_Capital_Group.

Knight Capital had a rich API providing a variety of trading functionalities to its users. Unfortunately for Knight, it didn't last because of a major developmental bug. Let's see how this failure was caused by an update in the trading algorithm of Knight Capital.

How did it happen?

This section details the sequence of ...