Knight Capital Group
Knight Capital Group was a major American financial services firm and market maker that experienced a catastrophic software failure on August 1, 2012.
Knight Capital Group was a major American financial services firm and market maker that experienced a catastrophic software failure on August 1, 2012. The company's redundancy architecture automatically shifted trading to backup servers containing outdated software, executing $7 billion in unintended trades and generating a $440 million loss in 45 minutes that bankrupted the firm.
The chapter uses Knight Capital as a cautionary tale demonstrating that redundancy adds complexity and can create new failure modes if not carefully managed. The case shows how automatic failover to unsynchronized backup systems can be more dangerous than no redundancy at all.
Cautionary Notes on Knight Capital Group
- Redundancy without synchronized configuration caused catastrophic failure
- Automatic failover to outdated backup systems can be worse than no redundancy
- Complexity of redundant systems created the failure mode