How a software error led to an $8.65 Billion trading collapse
On August 1, 2012, Knight Capital Group experienced a major software failure that led to a significant stock market disruption and enormous financial losses. The problem began when a technician failed to update the Retail Liquidity Program (RLP) code on one of the eight SMARS servers, which was Knight's automated routing system for equity orders. This server still ran outdated code, specifically the "Power Peg" function, which was repurposed by the new RLP code. As a result, the server sent out orders indefinitely without properly recording their completion.