Yours is the correct viewpoint: it is incompatible with human cognition.

If an alert system is not perceived as highly reliable in directing positive action, then the humans involved will inevitably disable the alert system, either by pulling out a screwdriver or rewriting their mental rubrics to ignore the messages as noise.

Knight Capital is just the finance version of Three Mile Island and Deepwater Horizon -- the means to mitigate or prevent disaster were on hand, but the people in charge just dithered by the kill switch because they were confused. Well, if the people in charge are confused, that is a reason to start the emergency procedures.