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Knight Capital's $440M Loss Blamed on Developers

I'm surprised that my inbox wasn't spammed by every software testing company last week, telling me how they could have prevented the Knight Capital Group financial software fiasco. Knight on Tuesday last week installed new trading software and immediately the software went to work, but not in a good way. Instead, the trades made by the new software bled the company of $440 million in stock value after two days of trading. Once company officials pinpointed it to software, the trading system was knocked offline, but the damage had already been done.

Indeed, company officials pinned the blame on its software developers, which makes me wonder: a) How could a bug as damaging as that one gone undetected all the way to its installation onto production servers? b) What kind of testing regimen did the software developers put the code through? I'm going to go out on a limb and guess that the developers did rigorous testing of the system ahd that those developers are being made scapegoats.

Posted by Michael Domingo on 08/03/2012 at 11:59 AM


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Fri, Aug 10, 2012 Dimitrios Kalemis Athens, Greece

Thank you, Brian Antonoff, for sharing your experience. Unfortunately, stories like yours are as old as IT. Upper management is almost always to blame in situations like these. No matter how much effort IT people put in explaining to them the risks of under-testing, they do not care and do not want to understand. They only care about making money, whereas they should care about both making money and the quality of their products and services. And when something goes wrong, they find scapegoats, as Michael Domingo mentioned.

Tue, Aug 7, 2012 Brian Antonoff Ft. Lauderdale, Florida

Michael - I will bet EVERYTHING that the developers did test, but it was the degree & extent they went to & most importantly were allowed to. I have first hand experience in this. As the Director of Development at First Data Merchant Svcs. I was responsible for 6B a week in credit card transactions. My boss PETE C. came to me with an underbudgeted project and when it came time to test I presented a plan for regression and parallel testing. He only approved regression testing. Parallel testing always showed me things in my system regression testing missed. Needless to say, when the massive changes went in they failed and it took 1 week and over a million dollars to recover. I had 100 pages of emails, documentation and proof that I had warned him against not funding parallel testing and even one where he said he'd take the heat for not funding it. But you know how the story ends - I got blamed for a miriad of things that he made up and I lost my job. To this day it haunts me - because I NEVER wanted to do the project or move the changes in production without the parallel test. My guess - management was probably cutting corners here. But they will never admit to it !!!

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