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Trading Firm On The Brink After Massive Software Error

Matt Pressberg |
August 2, 2012 | 5:01 p.m. PDT

Executive Producer

Computerized stock trading can be dangerous. (Dick Thomas Johnson/Flickr)
Computerized stock trading can be dangerous. (Dick Thomas Johnson/Flickr)
Knight Capital Group is now fighting for survival after a $440 million trading loss caused by a software glitch bled through much of its capital, sending its stock price plummeting and forcing the company to search for emergency outside funding to stay afloat, Reuters reports.

Knight is a financial services firm that acts as a market maker for stock trades, matching up buyers and sellers and often using its own cash to add liquidity to the market. Wednesday's disaster occurred when its trading software sent a barrage of false trades for 45 minutes, resulting in Knight taking big losses on stocks it bought at wildly over-inflated prices.

The speed and scale of Knight's collapse is likely to attract more scrunity toward the increasingly automated and computerized workings of financial markets, creating a system in which busted software can spring a hundred-million dollar leak in under an hour. Knight is currently in talks with private equity firms and investment banks, but its stock slid 63 percent on Thursday as investors doubt the company can fully recover.


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