Knight Capital gets 400 million dollar lifeline
Knight Capital, the New York market maker that lost 440 million dollars in minutes after its IT system went haywire, has been thrown a lifeline by a group of investors.
The group, which creates markets for particular shares by acting as a middleman for buyers and sellers, said the investors had taken a majority stake in the firm for $400m.
The group of investors includes TD Ameritrade, Blackstone Group, market maker Getco, and financial services firms Stifel Nicolaus, Jefferies Group and Stephens Inc.
They will receive 267m shares of Knight, according to a document filed with the Securities and Exchange Commission.
These shares amount to around three times Knight's outstanding shares, enraging investors who pushed the shares down 30%.
They then recovered to trade 23% down by mid-morning on Wall Street.
The stock plunged 60% last week after an IT glitch flooded the New York Stock Exchange with orders.
However, it recovered much of this ground after some clients who had suspended trading with Knight reactivated their accounts.
Knight Capital put the problem down to a faulty software upgrade, but the incident has shone a harsh light on the world of high-speed electronic trading, which critics say causes instability in the system.