Knight Capital says capital base 'severely impacted'
Knight Capital Group, a U.S.-based stock trading firm, is blaming a software installation problem for a technical glitch that briefly threw trading of dozens of stocks into chaos on Wednesday.
The company also said in a statement Thursday that the error would cost the company roughly $440 million US, an expense that "severely impacted" its capital base.
Knight's stock closed down more than four dollars at $2.58 on the New York Stock Exchange Thursday, having lost three quarters of its value in two days on heavy volume.
Knight takes stock trading orders from big investors and routes them to the exchanges where shares are traded. Early Wednesday, a technical problem at Knight caused shares of a number of stocks to swing wildly for close to an hour.
Wizzard Software, for example, shot up to $14.76 after closing the night before at $3.50.
The New York Stock Exchange said Wednesday morning that it was examining unusual trades in about 140 stocks.
Later in the day it canceled trades of six smaller stocks that had wide swings, including Wizzard. For investors, it was the latest breakdown in the increasingly complicated electronic systems that run stock trading.
Those systems have been showing signs of strain as more traders and big investment firms use powerful computers to carry out trades in mere fractions of a second.
The latest disruption came in May, when technical problems on the Nasdaq stock market marred Facebook's debut as a public company, preventing some investors from knowing if they'd bought shares or being able to sell them.
This week's glitch is an ironic embarrassment for Knight, which publicly criticized Nasdaq for the problems with Facebook's initial public offering. Knight said the faulty software installation sent "numerous erroneous orders" into the market.
The company said the software has been removed and that its clients were not negatively affected. Knight also said that even with the $440 million charge, it still is "in full compliance with (its) net capital requirements."
Knight also said it would examine "strategic and financing alternatives" to help the company absorb the loss. The company did not immediately provide details of those plans.