Knight Capital shares plummet after $440 million computer glitch

Software error caused extreme price swings in some NYSE stocks, led to canceled trades

A costly computer glitch has left Knight Capital Group with a $440 million pre-tax loss, the firm announced Thursday, severely impacting its capital base and sending shares into a tailspin.

The trading firm’s stock fell by almost 50 percent in early trading Thursday, one day after a new trading software caused Knight’s systems to send “numerous erroneous orders in NYSE-listed securities.” The result was extreme price volatility in several stocks, including Goodyear Tire & Rubber Co., Manitowoc Co. and China Cord Blood Corp. Exchange officials reviewed trades in 140 different issues and canceled trades in at least six stocks that tripped circuit breakers instituted after 2010’s “flash crash.”

Following the computer errors, Knight advised clients of its market-making unit to route orders elsewhere. The firm, which ultimately exited all affected positions at a significant loss, said in a statement Thursday that it was “actively pursuing strategic and financing alternatives to strengthen its capital base.”

Ironically, Knight’s CEO, Thomas Joyce, was critical of the technological errors surrounding Facebook’s mid-May IPO, which cost Knight $35.4 million. Now Joyce is exploring options that reportedly include a sale or an emergency loan from J.P. Morgan Chase.

Read the full story at Reuters.

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