RIP Knight Capital

Knight Capital RIP

The speed with which this company has imploded boggles the mind.

  • Tuesday evening Knight installs new software to conform with a New NYSE Retail Trading Program
  • Wednesday morning betwen 9:30 – 10:00 am EST a bug burns through 5 billion in trades losing $440 million
  • Thursday Knight Capital (KCG) CEO goes on Bloomberg to talk about nothing
  • Thursday KCG loses 60% of it’s market cap
  • Thursday Citadel is being referenced as a possible buyer

The end.

RIP Knight Capital

What’s so monumentally stupid about this story is that the bug was buying the ask OR selling the bid in 100 share blocks between 10 and 20 times a second for 30 minutes on 150 stocks, no matter what the spread. Not AND/OR  just OR. Do the math…

There were a handful of traders who caught on and started making lots of money, they pocketed handsomely. That’s where my evil chuckle slips out. Smart algo, becomes dumb algo, smart trader eats dumb algo’s lunch.

Poignant.

There’s little good news for the employees or shareholders of Knight. I can imagine the developer, tester, integrator who screwed up has hired a bodyguard and is at home having a drink or two. The bloggers are having a hayday.

Themis Trading’s commentary is worth reading.

Good EOD.

*update 9/11/12

Knight Hires IBM to review the glitch. That’ll be a good contract for IBM!