Electronic trading leads to a big 'oops!'
Knight Capital trading debacle shows Wall Street frailties
A software bug leaves brokerage Knight Capital teetering on failure, raising fears of structural flaws in the financial system.
By Andrew Tangel and Jim Puzzanghera, Los Angeles Times
5:00 AM PDT, August 3, 2012
NEW YORK — The high-speed trading arms race being waged on Wall Street has finally claimed its first major casualty.
Knight Capital Group, a brokerage that handles nearly 11% of all stock trading in U.S. companies, is in danger of collapsing after a software glitch triggered millions of unintended orders. The New Jersey firm lost $440 million in less than an hour — nearly four times the company's profit last year.
The blunder, which Knight's chief executive said on television was "a bug, a large bug" in its computer systems, caused Wall Street to shudder. Major clients including Vanguard Group, E-Trade and TD Ameritrade, which rely on Knight to fill orders for retail investors, pulled their business on fears that the damage isn't over. Leaders of the embattled brokerage scrambled Thursday to find rescue funding or even a buyer.
But, more broadly, the debacle highlights concerns on Wall Street and in Washington about structural flaws in the U.S. financial system. Observers are worried that the reliance on computer-driven trading, where stocks are bought and sold in the blink of an eye, could lead to a major equities meltdown.
(More here.)
By Andrew Tangel and Jim Puzzanghera, Los Angeles Times
5:00 AM PDT, August 3, 2012
NEW YORK — The high-speed trading arms race being waged on Wall Street has finally claimed its first major casualty.
Knight Capital Group, a brokerage that handles nearly 11% of all stock trading in U.S. companies, is in danger of collapsing after a software glitch triggered millions of unintended orders. The New Jersey firm lost $440 million in less than an hour — nearly four times the company's profit last year.
The blunder, which Knight's chief executive said on television was "a bug, a large bug" in its computer systems, caused Wall Street to shudder. Major clients including Vanguard Group, E-Trade and TD Ameritrade, which rely on Knight to fill orders for retail investors, pulled their business on fears that the damage isn't over. Leaders of the embattled brokerage scrambled Thursday to find rescue funding or even a buyer.
But, more broadly, the debacle highlights concerns on Wall Street and in Washington about structural flaws in the U.S. financial system. Observers are worried that the reliance on computer-driven trading, where stocks are bought and sold in the blink of an eye, could lead to a major equities meltdown.
(More here.)
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