Knight went down on a single system glitch. Buttonwood lost it all on a rogue trader in Ethanol futures in December. This product is uncharted territory for me, but I’m told its closely connected to other commodity futures such as corn. The trader had a reputation among other Ethanol traders. According to unconfirmed chatter his ethanol gamble was in line with his image.
Here’s the chart of the Jul Ethanol CBOT future, Buttonwoods graveyard.
Another product from the other side of the world. The Korean Kospi future. An apparent software bug in an algo active in the Kospi future rocked the market. Turnover jumped 30% and the open interest increased with 19.000 contracts. Algo sent a small buy order for 1 lot. Fine, but 100.000 of those small buy orders may be overdoing it.
At a certain moment 110.000 Kospi futures assembled together on the bid. Around 25.000 bids were filled. Weird thing is this whole algo gone mad lasted for over an hour. As one commenter points out, the value of the 25k futures is around 3 USD billion. The losses are estimated at USD 8 – 15 million. Pocketmoney for some banks. But for the involved market maker, Eclipse, probably a near death experience.
Graph from the entertaining Australian Investment Banker Cyclist. Unfortunately not in the same detail as the ethanol graph, but at least lots of colors.