Knight Capital on the chopping block


In the modern world of computer-driven trading, small mistakes can have magnificent consequences.

A great example is Knight Capital. The company recently suffered a software bug in the code that was designed to connect the market maker to the New York Stock Exchange's Retail Liquidity Platform. The glitch resulted in $440 million in losses in less than an hour. The firm tried to persuade regulators to cancel the trades, but had no luck. The big error forced the firm to seek a capital injection, which it received in the form of a big equity investment from six other market-making firms.

Some thought that was the end of the story, but that final chapters are now being written. Bloomberg reports that Knight Capital is entertaining acquisition proposals. Bids are due this week.

"An acquisition would end Knight's independence following more than a decade in which Chief Executive Officer Thomas Joyce built it into one of the biggest market makers, executing about 10 percent of U.S. share volume. Joyce sent an e-mail to employees over the weekend saying capital levels are strong and no deal will be done unless it makes sense for the company," the article reports.

The firm's wholesale business, which has locked up a lot of retail order flow, will no doubt prove attractive to many firms. Getco and Virtu have been raised as obviously interested parties. Some of the powerhouse investment banks may also take a look.

For more:
- here's the article

Related articles:
NYSE Euronext wants more power to cancel orders
Knight Capital forced to halt orders


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