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Knight Capital Plummets 58%, Looks to J.P. Morgan for Lifeline ^ | 8/2/2012 | Matt Egan

Posted on 08/02/2012 7:02:55 AM PDT by mykroar

A day after spooking Wall Street with a massive trading glitch, Knight Capital Group (KCG: 6.94, -3.39, -32.82%) revealed a stunning $440 million pretax loss on Thursday tied to the incident, sending the embattled market maker’s shares plummeting another 58% and searching for an emergency loan from J.P. Morgan Chase (JPM: 36.00, 0.00, 0.00%).

The turmoil has forced Knight Capital to reach out to J.P. Morgan for emergency financing aimed at shoring up the company’s depleted capital base, a source told FOX Business’s Charles Gasparino.

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TOPICS: Business/Economy; News/Current Events
KEYWORDS: glitch; jpmorgan; knightcapital; trading
While it’s not as well known as the Big Board and other financial institutions, Knight Capital is an important cog in the capital-market system.

Don't really do any trading myself, but saw this when I was looking for the unexpected unemployment numbers - and thought some would want to comment.

1 posted on 08/02/2012 7:03:01 AM PDT by mykroar
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To: mykroar

The system is becoming increasingly unstable. The mean time between financial crises is shrinking every day.

2 posted on 08/02/2012 7:09:33 AM PDT by DManA
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To: mykroar
also provides liquidity for exchange-traded funds (ETFs) and over-the-counter securities.

Notice that in this case a third of the liquidity disappeared overnight. Think I'll go back and review some of the warnings I've read about using ETFs.

3 posted on 08/02/2012 7:14:25 AM PDT by DManA
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To: DManA
Bad financial algorithm leads to severe stock market disarray
4 posted on 08/02/2012 8:10:44 AM PDT by glorgau
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To: glorgau
Check out this amazingly ignorant comment on that post:

In the long run, if your model is reasonable, you'll be fine.

The models are all reasonable, until they're not. And when they are making 1000 trades a second who is going to decide it is no longer reasonable? And a reasonableness checking module to the system?

5 posted on 08/02/2012 8:16:43 AM PDT by DManA
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