How to Test Your New Market Making Software and Avoid Detection and Losing a Pile of Money, Fast

“It seems Knight Capital Groups’ market making algorithm went haywire and started selling at the bid and buying at the ask, just the opposite of what it should do. This turned their algorithm into a money burning mechanism. Since these algorithms are now very fast, KCG lost the bid/ask spread about 24 times per second across many stocks, which means it was very efficient at burning money. It looks like KCG lost $440 million in a few hours yesterday (8/1/2012) morning. For a detailed, and up-to-date, summary of KCG’s calamitous morning I recommend the analysis on Nanex.”

 

Knight Capital Group, A Perfect Example of Firm Specific Risk

 

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London Skyscraper Index

Interesting analysis which looks at the Skyscraper Index concept from a London perspective, that is that world’s tallest buildings have risen on the eve of economic downturns. Business cycles and skyscraper construction correlate in such a way that investment in skyscrapers peaks when cyclical growth is exhausted and the economy is ready for recession. Barclays Capital have done some recent work on this, the blog post linked to looks at this in the context of London.

London and the towers of (economic) doom

Foxconn

This has been making me think recently. I’m due to upgrade my smartphone in the next couples of months. Like many consumers my first choices would be between the Apple iPhone 4S and the Samsung Galaxy S II. However like the majority of major consumer electronics firms, both Apple and Samsung contract out component assembly and parts of their manufacturing to China-based Foxconn, who have some questionable business practices in regards to working conditions in their manufacturing plants. This is the latest controversy to spring up around them recently.

Foxconn Boss Compares His Workforce to Animals

The Bengal Renaissance

Been doing some reading recently on the Bengal Renaissance. These were names I knew growing up but it’s been interesting to take an in-depth look at the history. It was an intellectual awakening comparable to the European Renaissance, which took place in the 19th and early 20th century in Bengal in undivided India during British rule. In art and literature it gave us South Asia’s first Nobel poet laureate with Rabindranath Tagore. In science and mathematics it produced the foundation of quantum mechanics in the form of Bose-Einstein statistics.

The Bengal Renaissance