4292 days ago
Knight Capital (KCG) is a US market maker. If it is lucky it might still be in a few weeks. The odds are it is bust (though it denies it) after it lost $440 million after an in-house trading software programme (an algo) went bonkers and made a stupendous number of mad trades which were bound to lose money (buying on the offer and selling on the bid at the same time). Some trades have been unwound. Others cannot be and Knight Capital must pick up the tab. Heck they are only market makers do we have any sympathy? Er…no.
The left will blather on about a failure of regulation, evil casino banking blah blah blah. They rather miss the point, as ever. What Knight Capital did in using an ago to trade was legal and all the regulation in the world and having the late Mother Theresa brought in as COO to instil a new corporate culture could not stop a programme messing up. Knight Capital should shoot its IT department, if it could afford any bullets. It is as simple as that.
As it happens I think the use of algos is a pointless exercise.
