Knight Capital issued a statement that a "technology
issue" at its market making unit was behind the volatile price
movements in 140 shares yesterday that forced Nyse Euronext to
In early morning trading prices in dozens of stocks went
haywire, reviving memories of the May 210 flash crash. After
reviewing 140 stocks, Nyse Euronext eventually cancelled orders in
With the finger of blame pointing at it and a faulty algorithm,
Knight Capital confirmed that it was behind the chaos, saying:
"This morning, a technology issue occurred in Knight's
market-making unit related to the routing of shares of
approximately 150 stocks to the Nyse."
The Securities and Exchange Commission has confirmed it will be
looking at the issue, saying: "As is our practice, we are closely
monitoring the situation and in continuous contact with the Nyse
and other market participants."
Shares in Knight - which, according to Bloomberg, helped execute
almost $20 billion of equity transactions a day in June - closed
yesterday just shy of 33% down, at $6.94.
In a statement on Thursday, Knight says: "As previously disclosed,
Knight experienced a technology issue at the open of trading at the
Nyse yesterday, August 1st. This issue was related to Knight's
trading software and resulted in Knight sending numerous
erroneous orders in Nyse-listed securities into the market. This
software has been removed from the company's systems.
"Clients were not negatively affected by the erroneous orders, and
the software issue was limited to the routing of certain listed
stocks to Nyse.
"Knight has traded out of its entire erroneous trade position,
which has resulted in a realized pre-tax loss of approximately $440
million. Although the company's capital base has been severely
impacted, the company's broker/dealer subsidiaries are in full
compliance with their net capital requirements. Knight will
continue its trading and market making activities at the
commencement of trading today. The company is actively pursuing its
strategic and financing alternatives to strengthen its capital