Knight Capital on Brink After Millions of Accidental Trades

Talk of regulation heats up after brokerage debacle
By Kevin Spak,  Newser Staff
Posted Aug 3, 2012 8:51 AM CDT
Knight Capital on Brink After Millions of Accidental Trades
Joseph Dreyer, center, of Knight Capital Americas, works on the floor of the New York Stock Exchange Tuesday, July 26, 2011, in New York.   (AP Photo/Henny Ray Abrams)

Forty-five minutes. That's how long it took Knight Capital to lose $440 million on Wednesday when its new trading software went haywire, making millions of unintended trades, and leaving it at the brink of collapse. Now the company is fighting for its survival, and debate is heating up about whether new regulation is needed to bring a complicated market to heel. "The structure just may be too complicated to work," one consultant tells Reuters.

That $440 million loss represents roughly four times Knight's annual net earnings, according to Reuters, leaving it scrambling to find cash or a buyer. The company's stock price has plunged around 80%. Knight is one of the leading market makers responsible for keeping transactions flowing smoothly on Wall Street. Some SEC officials are now calling for new regulations, protective mechanisms, and testing requirements for trading software, the New York Times reports, and they're getting less pushback than usual. Recent events "have scared the hell out of investors," one former SEC chairman said. (More Knight Capital stories.)

Get the news faster.
Tap to install our app.
Install the Newser News app
in two easy steps:
1. Tap in your navigation bar.
2. Tap to Add to Home Screen.