Errant Trades at Knight Capital Reveal a Risk Few Expected

"When they put these things out in the world they are really being tried for the first time in a real-life test," said David Leinweber, the head of the Center for Innovative Financial Technology at the Lawrence Berkeley National Laboratory. "For other complex systems we do offline simulation testing."

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Some critics of the current market structure have said that much bolder reform is needed. One change that has been contemplated is a financial transaction tax, which would force firms to pay a small levy on each trade. At the right level, this could pare back high-frequency trading without undermining other types, supporters say.

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But Representative DeFazio, who favors a levy of three-hundredths of a percentage point on each trade, says he thinks the benefits of high-frequency trading are overstated. "Some people say it's necessary for liquidity, but somehow we built the strongest industrial nation on earth without algorithmic trading," he said.