Knight Capital Group reported a quarterly net loss of $389.9m on wider-than-estimated losses for trading revenue resulting from a software error that nearly bankrupted the market maker.
Bloomberg reports that the third-quarter net loss was the worst since at least 2001. Revenue was negative at $189.8m, including a $457.6m trading loss related to an August 1st computer malfunction, the company said. The trading loss was more than the $440m previously reported.
A technology error August 1st bombarded equity exchanges with erroneous orders, leading Knight, one of the largest traders of U.S. shares by volume, to the brink of insolvency as customers routed orders elsewhere and the shares plunged 75% in two days. The Jersey City, New Jersey-based company was rescued by an investor group the following week.
'In the aftermath of Knight Capital’s August 1 trading glitch, a primary concern has been the potential for permanent loss of business for the firm’s U.S. equities market-making unit', Patrick O’Shaughnessy, a Chicago-based analyst with Raymond James & Associates Inc., wrote in a note this month. He estimated that Knight’s market share of wholesale volume fell to 24.4% in August from 34% in July.
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image: © Justin Marty