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Knight Capital (KCG) announces a $440M loss from yesterday's glitch which was the result of the...

Knight Capital (KCG) announces a $440M loss from yesterday's glitch which was the result of the installation of trading software (now removed). Shares disappearing, -50% premarket after a 33% decline yesterday. (PR)
Comments (28)
  • Ted Bear
    , contributor
    Comments (589) | Send Message
     
    Success is SO fleeting......

     

    Imagine, just one key stroke and a firm vanishes.

     

    Oh yes, we 'understand' risk.
    2 Aug 2012, 08:46 AM Reply Like
  • neobliviscar
    , contributor
    Comments (161) | Send Message
     
    Honestly, it is the IT guys who often don't get it. What idiots rolled this out full field overnight on Fed Day?

     

    Best way to deal with a mouthy IT guys and their contempt of traders was to make them sit for a week with a training simulator and make them trade their own money. If they made set amount X, they get a bonus. If they lose Y, it comes out of their remaining pay.

     

    After a few days to a week, they cry to get off the trade desks and never ever give attitude again. If they hit X, you made them a trader. None ever did. IT guys and the management above them did slapdash job and took two to the chest sans bulletproof jacket.
    2 Aug 2012, 04:17 PM Reply Like
  • Matthew Davis
    , contributor
    Comments (3730) | Send Message
     
    Will this company go bankrupt because of this? Seem like investors are ensuring that, what could make this an incredible opportunity if there is any?
    2 Aug 2012, 08:50 AM Reply Like
  • Rubicon Associates
    , contributor
    Comments (1794) | Send Message
     
    From Knight: 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 base.

     

    Uh-oh
    3 Aug 2012, 12:51 AM Reply Like
  • WMARKW
    , contributor
    Comments (10275) | Send Message
     
    MF Global said over and over again they were "in full compliance with their net capital requirements" until in the end.....they weren't.
    3 Aug 2012, 01:48 AM Reply Like
  • Matthew Davis
    , contributor
    Comments (3730) | Send Message
     
    Well then why have they hired someone to sell the company?

     

    That's pretty drastic for less than 24 hours after the debacle.
    3 Aug 2012, 02:26 AM Reply Like
  • SoldHigh
    , contributor
    Comments (1013) | Send Message
     
    Stuxnet derivative?
    2 Aug 2012, 09:13 AM Reply Like
  • rambler1
    , contributor
    Comments (411) | Send Message
     
    Death to Knight and all those who embraced HFT & decimalization! Wake up regulators & Congress.
    2 Aug 2012, 10:48 AM Reply Like
  • Matthew Davis
    , contributor
    Comments (3730) | Send Message
     
    This happened last year too, remember BATS??

     

    HELLO CONGRESS!
    2 Aug 2012, 05:49 PM Reply Like
  • Whitehawk
    , contributor
    Comments (3129) | Send Message
     
    Need investigation into root cause, and not rush to blame electronic trading/HFT. Cybercrime needs to be ruled out. Regulators are useless in preventing these "events," and the industry needs to restore secure processes and confidence, or risk further declining volumes and customer interest in public markets.
    2 Aug 2012, 04:12 PM Reply Like
  • deercreekvols
    , contributor
    Comments (5248) | Send Message
     
    Knight Capital's twenty-something IT Chief did say: "My bad." before being fired, however.
    2 Aug 2012, 04:50 PM Reply Like
  • sethmcs
    , contributor
    Comments (3137) | Send Message
     
    It is never a good thing to lose a market maker. How would any of us feel if we pressed the button to execute a trade and nothing happened?
    2 Aug 2012, 05:22 PM Reply Like
  • Matthew Davis
    , contributor
    Comments (3730) | Send Message
     
    If it means losing a market maker that almost crashed the market? Absolutely, to the dust bin with them!

     

    Some one will take their place,

     

    I will also say, bycot the firms that have acknowledged the use of HFT. It is up to the concerned citizens to take their money where the more responsible traders are. If someone like Vanguard or BGC or E*Trade would come out and make a statement forsaking the HFT then people would flock to them.
    2 Aug 2012, 05:50 PM Reply Like
  • goudas
    , contributor
    Comments (3) | Send Message
     
    i wonder, who got the 440 mil?
    2 Aug 2012, 06:42 PM Reply Like
  • brachiosaurus
    , contributor
    Comments (237) | Send Message
     
    I know several people who had limit sell orders (the sort of pie in the sky sell orders that you'd never imagine getting filled) out on a certain stock that rocketed yesterday morning. They said they were drowning in money.
    3 Aug 2012, 12:24 AM Reply Like
  • JeffreyLangBoyd
    , contributor
    Comments (649) | Send Message
     
    brachiosaurus you may have an important point there. Obviously, people won't want to do business with them (which kills them), they may have (but I don't think so) broken some laws but regardless you know they are going to get fined in some way but what would definitely kill them are capital calls and lawsuits from those negatively impacted by those trades.

     

    I'm having a hard time of thinking who was negatively impacted by the trades and could sue. Maybe there is someone but right now I can't think of who they are.
    3 Aug 2012, 06:54 AM Reply Like
  • Matthew Davis
    , contributor
    Comments (3730) | Send Message
     
    Down with HFT, its time for the real investors to reject firms that use this technology and I will move my accounts to the first major Market Trader (etrade, ameritrade, scottrade, ect) that speaks out openly against this practice. Since Congress and the SEC refuse to take action, the investors must do the right thing.

     

    If Congress is willing to pull Dimon out onto the carpet, why are they not doing the same thing to these executives, and bring out the HFT into the spotlight for some fair scrutiny. As of now, no one knows who the hell, or what the hell is governing or guiding HFT. There are no rules, there are no limitations as to the damage these idiots can do to our wealth. The flash crash is just the tip of the iceberg. Just wait until 3 or 4 of these machines go haywire at the same time attempting to out trade each other! What do you think will happen then? It will crash the whole system.

     

    I just pasted this from another market current on the subject, my comments.
    2 Aug 2012, 06:44 PM Reply Like
  • Whitehawk
    , contributor
    Comments (3129) | Send Message
     
    Fair enough. What about NASD's handling of the FB IPO (granted that given the IPO was overpriced and overissued)?

     

    I agree investors and traders need to give the industry a strong message, and we cannot expect regulators to fix this, or even get involved further (the SEC is useless, a waste of taxpayer money, and only further perpetuates moral hazard). My own view is that there needs to be greater involvement from independent sites that review, rate and rank industry participants, and include feedback from professional and retail traders/investors. Yes, these exist, but are not visible enough.

     

    As for HFT - I'm not entirely convinced that is the problem. Someone needs to provide some hard evidence that it is.
    2 Aug 2012, 07:15 PM Reply Like
  • Matthew Davis
    , contributor
    Comments (3730) | Send Message
     
    "As for HFT - I'm not entirely convinced that is the problem. Someone needs to provide some hard evidence that it is."

     

    Precisely the point, there is evidence, that immediately gets covered up ie. The flash crash. Who was it, what company, what machine, what algorithm? How can you blame a fat finger for something like this if its a meticulously calculated mathmatical formula, and they want us to believe it was a mistake? Some one attempted to get greedy, by sending out a bloated software program to hyper inflate profits, and it self destructed on them.

     

    Time to find out, who the hell these people are, and what are these machines and algorithms that are causing chaos in the markets. In the first few minutes, the trading floor was flooded with 300 million trades, when average volume for the day is 143 million. So you are saying there is no evidence? When retail investor trades are at an all time low?
    2 Aug 2012, 07:45 PM Reply Like
  • Hendershott
    , contributor
    Comments (1514) | Send Message
     
    Add the SEC, NYSE and NASD, all of whom have overseen the destruction of our capital markets, even cheered it on, all in the name of greed.
    2 Aug 2012, 08:38 PM Reply Like
  • Hendershott
    , contributor
    Comments (1514) | Send Message
     
    What more %$#!ing evidence do you need?
    2 Aug 2012, 08:41 PM Reply Like
  • Whitehawk
    , contributor
    Comments (3129) | Send Message
     
    I did not say "there is no evidence." I am saying that hard, factual, detailed evidence that HFT caused this problem, and that it general causes more problems than it solves, must be made available, if it exists (I'd like to see it - send me any/all links, and I will review). Some of the details on HFT are tough to get because of their proprietary nature. That should not be used as an excuse for an independent evaluation with an NDA.

     

    A coverup to prevent dissemination of this information? Perhaps. I'd offer more conspiracy theory fodder: was Knight Trading targeted?

     

    This industry will lose all retail customers completely if they continue not to resolve these questions and allay concerns, and most importantly, to educate the public about any misconceptions or misinformation. So far, they haven't done a great job of that, and regulators are USELESS and more dangerous (do nothing, spend taxpayer money, and increase moral hazard). Let the markets work. If they are so %$#!ed up, then the investing public will continue to pull money and interest. (This could create an oppty for alternative markets, BTW.)
    4 Aug 2012, 02:15 PM Reply Like
  • WMARKW
    , contributor
    Comments (10275) | Send Message
     
    I still don't understand how HFT bypasses the "free-riding" rules and the need for settlement to occur at T+3 prior to re-trading and re-trading. I get slapped with a warning everytime I make a mistake and sell a stock before settlement and then re-buy. I cannot buy a stock in the AM then sell it for a profit, then buy it again later if it goes down. Of course if I had settled cash I could, but how do you do a million shares in out in out. No one has that much settled cash.
    2 Aug 2012, 10:29 PM Reply Like
  • Matthew Davis
    , contributor
    Comments (3730) | Send Message
     
    Exactly, which is why we need outcry to force these businesses to open the books to look into what they are doing, and who is letting them do it? Did the SEC authorize them to do it?

     

    40 million trades on 150 stocks. WTF
    2 Aug 2012, 10:32 PM Reply Like
  • JeffreyLangBoyd
    , contributor
    Comments (649) | Send Message
     
    Are you doing this in a retirement account or a margin account? Know there are different rules but I wouldn't claim to be an expert.
    3 Aug 2012, 06:57 AM Reply Like
  • mikeyshark
    , contributor
    Comments (3) | Send Message
     
    I was a broker on the floor of the NYSE for 20+ yrs. When something like this happened, (or more specifically the flash crash) the specialist would call in the broker that represented the firm that flooded the floor with what looked like very suspect orders. They would hold up all the trades till he got back to the specialist, most times flying in and yelling to hold up all these trades, some idiot upstairs hit the wrong button, or something to that effect. Point is, all the big boys couldn't wait to get rid of the people, including the exchanges themselves. (No more competition). Now they set up the system so everything MUST trade in seconds. So, I say, you reap what you sow, and they DESERVE it. Unfortunately, there will be a lot of innocent people losing their jobs, like we all did on the floor. That's the downside
    2 Aug 2012, 11:21 PM Reply Like
  • Ted Bear
    , contributor
    Comments (589) | Send Message
     
    Mikey....see my post rewarding Harold Bradley, et al,in another thread who argued that they wanted to price their own merchandise and have direct access. Well, they got both. Hows it feel now? (By the way, since Harold's crusade, American Century's returns in their funds have generally been "uninteresting" to be polite.

     

    Om another note i have a report in my mail box this morning that says FINRA has been in KCG and audited the books, and everything is in compliance. That doesn't mean they aren't wounded (they are), but at the present time they are in regulatory compliance...and searching for a capital infusion which will likely be $300mm in converts...or so.
    3 Aug 2012, 08:58 AM Reply Like
  • Matthew Davis
    , contributor
    Comments (3730) | Send Message
     
    +7% pre market
    3 Aug 2012, 09:05 AM Reply Like
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