Financial firm's IT glitch returns a $440m loss
Critics of the financial sector’s IT systems appear to have fresh ammunition in the shape of Knight Capital, which has counted a loss of $440m (£282m) as a direct result of technology chaos relating to a software update.
Although the programme has now been removed from its systems, the US market maker said the company’s capital base has been “severely impacted” following installation of the trading software earlier this month.
Reported to have caused a conflict with old software, the update resulted in the firm sending “numerous erroneous orders” in NYSE-listed securities into the market, from the start of trading on of August 1st.
While Knight has insisted its clients were not negatively affected, the Securities and Exchange Commission has announced a review of whether the company’s IT systems complied with regulations.
The regulator said: “Reliance on computers is a fact of life not only in markets everywhere, but in virtually every facet of business. That doesn’t mean we should not endeavor to reduce the likelihood of technology errors and limit their impact when they occur.
“While Wednesday’s event was unacceptable, I would note that several of the measures we instituted following the Flash Crash helped to limit its impact”.
In a statement at the time, Knight Capital Group responded: “The company's broker/dealer subsidiaries are in full compliance with their net capital requirements… [and] the company is actively pursuing its strategic and financing alternatives to strengthen its capital base.”