A computer error at Goldman Sachs saw a wave of erroneous options orders sent out to American exchanges yesterday, and could cost the bank up to $100 million.
According to the Financial Times, an internal system used by the bank to track how it would price options on behalf of clients went haywire and sent expressions of interest as orders.
The orders - which went out to several exchanges, including Nyse Amex Options, Cboe and Nasdaq OMX - were placed with inaccurate price limits for around 17 minutes early yesterday morning.
The exchanges are reviewing the transactions in a process which is expected to take several days and determine the losses for Goldman. The bank says: "Neither the risk nor the potential loss is material to the financial condition of the firm."
The glitch again raises questions about the reliability of electronic markets, coming a year after a $460 million trading technology meltdown at Knight Capital. Only last week a computer error at Everbright Securities caused a flash rally in China's equity market.
Rik Turner, senior analyst, financial services technology, Ovum, says: There is an element of living by the sword and therefore dying by it here. Goldman in particular has been a major beneficiary of the changes to financial market infrastructures that led to trading automation, so if it has to lose $100m every now and again, there will be little sympathy amongst its peers and competitors."