The bad software code is gone now, he said, and some clients of the market-making business were executing with the firm by the end of yesterday after Knight told them initially to go elsewhere.
Citigroup Inc., the third-largest U.S. bank, is temporarily refraining from routing some trades through Knight, according to a person with direct knowledge of the matter. TD Ameritrade Holding Corp. has not yet started routing to Knight again, spokeswoman Kim Hillyer said.
“We are testing,” she said in a phone interview. “We want to make sure the client experience remains good.”
Knight spokeswoman Kara Fitzsimmons said she did not have “any confirmation or comment” about other clients still sending trades elsewhere. Stephen Austin, a spokesman at Fidelity Investments in Boston, declined to comment.
The NYSE reviewed trading in 140 stocks from Molycorp Inc. to AT&T Inc. 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. Trades in all of the other stocks were allowed to stand.
The software malfunction was the latest black eye for the computer infrastructure of an equity market stilled haunted by the May 2010 market crash, the botched initial public offering of Facebook Inc. and failed IPO of Bats Global Markets Inc.
Democratic U.S. Representative Maxine Waters of California said in an e-mailed statement that she is seeking hearings on the matter as a “drumbeat” of errors in stock markets shows the need for stronger controls.
Yesterday’s problem shows regulation is “broken” and a study group should be convened to review technology and market structure, Arthur Levitt, former chairman of the Securities and Exchange Commission, said in an interview. Regulators would have been able to stop incidents such as yesterday’s breakdown if they didn’t face a lack of resources, he said.
“The ability of regulators to do their job has never been weaker than it is today because of the failure of the oversight process,” Levitt, 81, said today in an interview. Levitt serves as a consultant to Getco LLC and Goldman Sachs Group Inc. and is a director of Bloomberg LP, parent of Bloomberg News. “Congress has a greater responsibility for what we’re seeing today than any regulator or any particular part of the industry. They’ve allowed this to happen.”
Kevin Callahan, a spokesman with the SEC, said in an e-mail that regulators are “closely monitoring the situation and in continuous contact with the NYSE and other market participants.”
Knight’s market-making unit executed a daily average of $19.5 billion worth of equities in June, according to its website. The unit traded 711 million exchange-listed shares a day in June, or about 10 percent of the U.S. market, according to data compiled by the company and Bloomberg.
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