Knight Capital Loses $440 Million in 45 Minutes From Misdeployed Trading Algorithm
What happened
Knight Capital Group lost $440 million in 45 minutes when a software deployment to 8 of their 9 trading servers activated old, repurposed code that began buying high and selling low at high frequency. The company had no kill switch for live trading positions and was near bankruptcy within hours.[1]
What went wrong
A deprecated feature flag SMARS was reused for a new system, but old code on one server still responded to it. The deployment to the remaining server was missed. With no circuit breaker or automated loss limit on live trading, the system ran for 45 minutes before anyone could stop it manually.[1]
Lesson learned
Deployment must be atomic and verified across all nodes. Repurposing old feature flags without removing all legacy code that responds to them is catastrophically dangerous. Automated circuit breakers with hard financial loss limits are mandatory in algorithmic trading.