[ by Howard Haykin ]

The Knight Capital Group suffered a power outage at its Jersey City headquarters on Wednesday, and instructed clients to route their orders elsewhere.  A backup generator that Knight has been using since Hurricane Sandy bowled through the NY tri-state metro area finally went dead today

Knight's previous significant technological problem - a "doozy" - occurred on 8/1/12, when the firm introduced a new routing system that ended up spewing out thousands of erroneous orders;  CEO Tom Joyce ordered the system to be launched on that date, even though it had not been adequately tested.  Many professionals on the Street, including this writer, believe that Mr. Joyce permitted his own "hubris" to get the better of him.  On that day, the NYSE and Amex launched an SEC-approved program for attracting retail orders - one that would effectively draw orders away from Knight and other market makers. 

And, if you don't recall, Knight ultimately purchased securities totaling around $7 billion.  Liquidating that monstrous position caused the firm to sustain a $460 million loss that nearly sank the firm before it was rescued by an influx of capital from 6 financial institutions that took control of the company.  Chief Tom Joyce is poised to take employment elsewhere.  [C-I Note:  Perhaps after finally receiving word that his services were no longer needed at Knight.]

Today's power outage seems to be the only hiccup in the resumption of market trading on Wednesday in the aftermath of Hurricane Sandy.

Here is the text of the letter sent to Knight clients:

    Dear Clients:

    Due to a building emergency (power issues), Knight Capital Americas is asking you to seek an alternate destination for the order handling and execution of your OTC, Options and Listed orders until further notice. This include Knightlink and Knightmatch clients.

    All computer interfaces with Knight will be shutdown with no new orders, both by phone or electronic, being accepted at this time.

    Please continue to e-mail Help@Knight.com with any questions.

    Thanks

[ Dealbook, 10/31/12 ]