In the Matter of Knight Capital Americas LLC
https://www.sec.gov/files/litigation/admin/2013/34-70694.pdf
Method
"The Securities and Exchange Commission (the 'Commission') deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934"
Population
"Knight Capital Americas LLC ('Knight' or 'Respondent')"
What it does not show
One incident at one firm; establishes no base rate for flag-reuse failures. The proximate cause was as much the incomplete deployment and the absence of a kill switch as flag reuse itself, and the SEC’s formal finding concerns market-access risk controls generally rather than flag practice.
U.S. Securities and Exchange Commission
A flag value that had been repurposed was safe on the seven servers that received the new deployment and catastrophic on the eighth, which did not: it re-activated dead code last used in 2003. SMARS “routed millions of orders into the market over a 45-minute period” and Knight “lost over $460 million from these unwanted positions”. Flag reuse plus an inconsistent deployment produced an effectively irreversible blast radius.
Tier III: Official third-party regulatory reconstruction of a single incident from the firm’s own systems and records, with hard financial and technical numbers. Not a scientific study; treated as case-study tier.