The Knight Capital Group is an American global financial services firm engaging in market making, electronic execution, and institutional sales and trading. With its high-frequency trading algorithms Knight was the largest trader in U.S. equities, with a market share of 17.3% on NYSE and 16.9% on NASDAQ.
Knight's stock (KCG) plunged for a second day, erasing 70% of its value in two days. The company also said it is pursuing ways to raise money to fund the expense, raising questions about the firm's viability. Knight's embattled CEO Thomas Joyce appeared publicly for the first time Thursday to defend his firm in the aftermath of the trading disaster. "You cannot keep people from doing stupid things," Joyce said in an interview on Bloomberg Television. "That is what happens when you have a culture of risk."
Private equity giant Blackstone Group LP and high-speed market-maker Getco, have sold some of their securities, according to regulatory filings on Knight's website. At least one other firm also is expected to make a regulatory filing about its sale imminently, said one of the sources, and the other three are expected to follow suit. Scottrade has indicated it will be a long-term investor, said one person familiar with the transactions.
On the heels of this announcement, KCG resumed its normal operations, and announced that many of its customers scared away by its current crisis have returned their business to the firm.
Knight Capital Americas LLC is a member of all domestic exchanges and marketplaces covering stocks, options and futures. Knight's non-U.S. broker-dealer subsidiaries are Knight Capital Europe Limited and Knight Capital Asia Limited.
Knight experienced an extraordinary trading loss on August 1, 2012, which significantly depleted Knight's capital base and in turn precipitated a loss of customer and counterparty confidence and liquidity crisis that, if not immediately addressed, would have threatened Knight's ability to continue to operate.
The Knight Capital Group confirmed on Monday (August 6, 2012) that it had struck a $400 million rescue deal with a group of investors, staving off collapse after a recent trading mishap, even as the New York Stock Exchange temporarily revoked the firm’s market-making responsibilities.
The Company operates in four segments: Market Making, Institutional Sales and Trading, Electronic Execution Services, and Corporate and Other. Its Market Making segment principally consists of market making in global equities and listed domestic options. Its Institutional Sales and Trading segment includes global equity and fixed income sales, reverse mortgage origination and securitization, capital markets and asset management activities. The Company's Electronic Execution Services segment offers access to markets and self-directed trading via its electronic agency-based platforms. The Corporate and Other segment houses functions that support its other segments.
The Company was organized in January 2000 as the successor to the business of Knight/Trimark Group, Inc. (the “Predecessor”). The Predecessor was organized in April 1998 as the successor to the business of Roundtable Partners, LLC, which was formed in March 1995. In May 2000, the Company changed its name from Knight/Trimark Group, Inc. to Knight Trading Group, Inc., and in May 2005 the Company further changed its name to Knight Capital Group, Inc.
In the mother of all computer glitches, market-making firm Knight Capital Group (KCG) lost $440 million in 30 minutes on Aug. 1 when its trading software went, to use the technical term, kablooey. That’s four times its net income from all of 2011, and a lot more than most analysts were estimating as the day unfolded. Knight’s chief executive officer, Thomas Joyce, told Bloomberg the day after the disaster that the firm had “all hands on deck” to fix a “large bug” that had infected its market-making software.
The Jersey City, N.J., brokerage, whose business processes 10% of all U.S. stock transactions, received $400 million of new capital from a consortium of private equity funds and other major financial players. It will keep Knight in business after suffering massive losses last week when a software glitch sent out a stream of unintended trades.