Skip to comments.Knight Capital Says Trading Glitch Cost It $440 Million
Posted on 08/02/2012 2:51:54 PM PDT by lbryce
$10 million a minute.
Thats about how much the trading problem that set off turmoil on the stock market on Wednesday morning is already costing the trading firm.
The Knight Capital Group announced on Thursday that it lost $440 million when it sold all the stocks it accidentally bought Wednesday morning because a computer glitch.
The losses are threatening the stability of the firm, which is based in Jersey City. In its statement, Knight Capital said its capital base, the money it uses to conduct its business, had been severely impacted by the event and that it was actively pursuing its strategic and financing alternatives.
The losses are greater than the companys revenue in the second quarter of this year, when it brought in $289 million.
With the events of yesterday, you have to question if this is the beginning of the end for Knight, said Christopher Nagy, founder of the consulting firm KOR Trading. Timeline: The Knight Capital Group's automated stock program flooded the market with millions of trades.
Shares of Knight Capital closed down 63 percent, at $2.58, on Thursday. On Wednesday, the shares fell 32 percent.
The problem on Wednesday led the firms computers to rapidly buy and sell millions of shares in over a hundred stocks for about 45 minutes after the markets opened. Those trades pushed the value of many stocks up, and the companys losses appear to have occurred when it had to sell the overvalued shares back into the market at a lower price.
The company said the problems happened because of new trading software that had been installed. The event was the latest to draw attention to the potentially destabilizing effect of the computerized trading that has increasingly dominated the nations stock markets.
(Excerpt) Read more at dealbook.nytimes.com ...
What REALLY happened....
Some insiders financially raped the company, and they manufactured this to cover it up : )
So, if this same glitch has worked in their favor; would they still have complained?
Or haven't these cretins ever heard of QA testing?
If they were good democrats, they could just take their customer’s money and put it in their accounts.
Wow..... sounds like the perfect storm, doesn’t it? Too convenient not to smell to high heaven.
Follow the money, as always. Find out who made big profits, while the dust was swirling. I new something was amuck yestserday morning when watching Fox Business = Eric was having a cow about “automatic trades”. Now it makes sense.
Sorry - I new = I knew.
Time for the popcorn!
“Knight Considering Bankruptcy, Looking At 363 Asset Sale
363 Asset sale? This is what we said earlier when we reported on the rumors of a sale to Virtu: “Will it happen? Maybe. Although we doubt it - why pay for equity value when one can pick up the functioning assets in a Chapter 363 asset sale which also sticks the creditors with all the crappy assets?” Sure enough. Sadly, what this means for the company 1,500 employees is that about 80% them will be out of a job due to an algo gone wild. And to then we have been warning about the impact of HFT for the past 3 years.”
Who concluded that this is a good thing?
One would think that volumes over a certain amount would be monitored and aborted. I suppose it's impossible to determine who were the big winners?
The computerized market, just like the slow version, is a "Zero Sum" game. Money, like matter, can't be destroyed. It can only change hands.
somebody has some splainin to do to the stockholders then...
Having done large system as well as web based system testing, the question i have is how much, what type, and what scenarios were tested, and was this a home-grown application, or was the development hired out?
Whoever is head of QA, and whoever was the test team lead are toast right about now. And whoever lead the code reviews.
I wonder, maybe a trojan horse was built into the system?