Daylife/Reuters Pictures used by permission

Knight Capital Group said losses from yesterday’s trading breakdown are $440 million, almost quadruple its 2011 net income and more than some analysts had estimated, and the firm is exploring strategic and financial alternatives. Its stock has lost 66 percent in two days.

Knight said it will continue its trading and market-making today as it considers its options. Yesterday’s issue was related to the installation of trading software and resulted in the company sending “numerous erroneous orders,” the Jersey City, New Jersey-based firm said today…

The New York Stock Exchange reviewed trading in 140 stocks from Molycorp (MCP) to AT&T, yesterday as the market’s open was disrupted. Trades that occurred during the height of the volatility were canceled in six securities, where prices swung at least 30 percent in the first 45 minutes…

As stock swings mounted yesterday, the company told some clients of its market-making business that a “technical issue” was affecting its systems and advised them to route orders elsewhere, according to e-mails from spokeswoman Kara Fitzsimmons yesterday. The issue was confined to that unit and its other operations were unaffected, she said.

The errors were caused by a malfunction in a trading algorithm, according to a person at Knight who asked to remain anonymous because the matter hasn’t been publicized.

Every geek knows all the excuses. It remains that the software wasn’t adequately tested before releasing it into the wild from the installation at Knight Capital.

The NYSE reacted to the disaster, picked up the bad trades happening and notified Knight Capital 1 minute after they started. It took Knight 45 minutes to halt the trades. WTF?

  1. orchidcup says:

    Sounds like a Windows software release.

    Oh well. It is only money.

  2. Animal Mother says:

    Capitalism fail.

    We need pure Communism now. Let’s hear it for Marx & Lenin.

  3. bobbo, a real liberal just waiting for sanity to return to American Politics says:

    This is why I’m a liberal. I don’t understand whats going on at all.

    Was it a program whose algorithm was supposed to bid up 3 points when a stock hit x and it failed to do so, or was the mistake that it picked the wrong target stock, or that the bid up should have only been 2.999999999999999999 points?

    Or was everything correct but the bids entered .0000000001 seconds slow?

    ……cause I’ve heard all those skimming programs masquerading as job creation are very technical having nothing to do with anything except the speed of electrons and where your computer is plugged in.

    …..and they still call it Capitalism?

    BHWAHAHAHHAHAHAHA! Stoopid Voters letting the government run amuck so–and mostly proud of it too.

    • dusanmal says:

      Yes, this is perfect example of free market Capitalism: you screw up, you lose and there is no one to nanny-you and save you from your own mistakes. Company who made this error is going to real bankruptcy. That is the proper resolution. Companies who earn money – prosper proportionally. As long as Government does not meddle. Either in form of regulations controlling what these free firms can or can’t do or in a form of preventing losers from losing (AIG, GM, GE,…). Because fighting free market is same as fighting gravity (after a brief respite by our money, GM is losing big and firing… science sez’ it must end up worse than if initially left to fend for itself).

      • bobbo, a real liberal just waiting for sanity to return to American Politics says:

        Auto Bailout Denier huh?

        Or like Suck My Dressage Horses Balls–do you take credit for the outcome after fighting it all the way?

      • msbpodcast says:

        Funny … that is not what happened with the banks.

        And now the banksters have got the gummints of Greece, Spain and Italy, and all the home owners in the US who still owe on their mortgages by the short and curlies, (miss just one payment and you’re on the fast road to ruin. [I’ve heard it described as Sliding down the razor blade of life using only your balls for brakes!])

      • NobodySpecial says:

        Actually about 1/3 of the trades have been reversed and they have been given the money back by the market. Trades where the price shifts by more than 30% can be cancelled to prevent screwups like this.

  4. Uncle Patso says:

    The old saying is truer now than ever:

    “To err is human, but to really screw things up you need a computer.”

  5. Jess Hurchist says:

    I’ve written programs and tested other peoples, finding defects is hard, and the fewer defects in the program the harder it is to find them.
    I prefer the form of words
    ‘The program wasn’t written properly’
    rather than ‘it wasn’t tested properly

    • bobbo, a real liberal just waiting for sanity to return to American Politics says:

      Wasn’t it both?

  6. George says:

    Some computer programmer is going to lose his job (and never find another) while the executive in charge of the market maker division will either get a promotion or be allowed to leave with his golden parachute.

    Market makers are companies that provide liquidity for the market. Suppose bad news hits the market and you tell your broker (or Etrade or whomever) to sell your shares in XYZ. Without a market maker, he may say, “To whom?” “Everyone is selling just like you are.” Market makers take those orders and buy and sell on those baskets of stocks that they make the market in.

    Obviously, some new trading software went FUBAR and Knight took a bath.

    This is a bit different in those market skimming programs, or at least it should be.

    • George says:

      One more thing… Stuff like this going on is why my nephew just graduated last spring from Yale with a degree in math and had a job waiting for him on on Wall Street for $140K/yr.

      Nice work if you can get it.

      • Joan Dvorak says:

        Your nephew could have graduated from Yale with a degree in 17th Century Women’s Studies and gotten a job on Wall Street for $140k.

        It is nice work, the only consolation is that $140k is barely enough to buy a parking space in NYC.

        With those guys your ONLY value is your connections. When you’ve been around long enough, just your rolodex is enough to earn you a few million a year.

        • NobodySpecial says:

          The difference is that the maths guys are still hired when the market goes down.
          They also get hired irrespective of skin color, sex, or the lack of “the 3rd” after their surname.

          It’s not quite as good as being automatically made VP of M&A because daddy was in the same fraternity – but quants are one of the few areas in American industry where smart employees are actually valued.

    • bobbo, a real liberal just waiting for sanity to return to American Politics says:

      So its a market liquidation algorithm huh?

      I’d look at it failing to maintain a connection for .5 seconds after the market closed for everyone else.

      Ha. ha.

      the whole notion of market liquidity is all about skimming.

      You all know skimming? No expertise at all==just the willingness to commit crime.

      Not hard when freedom is equated with expertise in fraud in a declining empire.

      Silly Hoomans–thinking stock should ever be sold.

      • Joan Dvorak says:

        They give it names to make you think that money somehow “disappeared” into thin air.


        It went into somebody’s pocket as always.

    • Joe says:

      It’s been reported that they may have to file for bankruptcy if they can’t find a suitor or investor, so they might all lose their jobs.

    • So what says:

      Probably a contractor.

  7. Bruce Wayne says:

    How convenient the Dark Knight continues it’s rise From the joker to the stock choker.

    Bap Wam, Pop Whack BANG. Smack Poof.

    nanaanananana Dark Knight.

    Mt Ordeals is the cure.

    Cecil Kain Rosa Edge Rydia Palom Porom.

  8. slotmouth says:

    This is actually a good company, unlike MF global. Someone made a simple mistake with huge consequences. I am an independent advisor and I have routed orders through this group before with excellent results. Companies like this cut out huge commissions and theft from middle men with huge markups. This was simply a case of human error and they are paying for it big time. I would expect a buyout in the next week, because there is some real value in this company.

    • bobbo, a real liberal just waiting for sanity to return to American Politics says:

      I’d a thought the value was in their software? Their ability to make a trade?

      Yes, even among thieves, some are better than others.



      From start to finish. Exceptions……. are just that.

      Yea, verily.

    • Joe says:

      Not really a “good” company. They with all other Nasdaq MM used to rape people with horrible executions by colluding with wider-than-market bid/ask spreads and keeping the difference for themselves (look up the 1996 antitrust suit).

      • slotmouth says:

        Get the facts, here is a list of the companies involved in the 1996 antitrust litigation:

        Alex. Brown & Sons Inc.
        Bear, Stearns & Co. Inc.
        CS First Boston Corp.
        Dean Witter Reynolds Inc.
        Donaldson, Lufkin & Jenrette Securities Corp.
        Furman Selz LLC
        Goldman, Sachs & Co.
        Hambrecht & Quist LLC
        Herzog, Heine, Geduld Inc.
        J.P. Morgan Securities Inc.
        Lehman Brothers Inc.
        Mayer & Schweitzer Inc.
        Merrill, Lynch, Pierce, Fenner & Smith Inc.
        Morgan Stanley & Co. Inc.
        Nash, Weiss & Co.
        OLDE Discount Corp.
        PaineWebber Inc.
        Piper Jaffray Inc.
        Prudential Securities Inc.
        Saloman Brothers Inc.
        Sherwood Securities Corp.
        Smith Barney Inc.
        Spear, Leeds & Kellogg LP (Troster Singer)
        UBS Securities LLC

        • I'm ugly and my mother dresses me funny says:

          You got a purty mouth.

          For an astroturfer.

  9. Joe says:

    What’s even more shocking is they lost that $440 million over the course of about 30 minutes. That’s $14.66 million a minute, or $244,444 a second!

  10. sargasso_c says:

    That’s a system restore and a polite letter asking investors for the money back. Pretty please!

  11. mharry860 says:

    I love John and Adam, but most of your regular commenters are morons.

    • bobbo, a real liberal just waiting for sanity to return to American Politics says:

      Thank you for being completely vague and totally irrelevant and non-specific.

      That entirely self involved commitment to public engagement allows me to agree with you completely.

      Who/what can we hate now?


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