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Knight Thrown Lifelines by Ameritrade, Scottrade

August 3, 2012
[ by Howard Haykin ] Two major brokerage firms - TD Ameritrade and Scottrade - made separate announcements Friday afternoon that they had resumed sending client orders to Knight Capital Group, in a tremendous and timely show of support for the beleaguered trading firm.  Both firms pulled their business from Knight on Thursday, but now are again routing trades to the market maker. Many other large Wall Street firms had discontinued their order flow to Knight, in large part because they didn't know what to make of the firm's disclosure that it had lost $440 million on the orders that were generated following a trading software glitch.

"After considerable review and discussion, we are resuming our order routing relationship with Knight.  Our priority has always been the interests of our clients, their trades and their assets. Knight is one of many order routing destinations for us and has long been a good and trusted partner." -- Fred Tomczyk, TD Ameritrade CEO.

A spokesperson for Scottrade said the firm had begun sending orders to Knight around 12:35 p.m. on Friday.

It's not clear whether other broker-dealers and investment advisers plan to begin routing orders to Knight.  Earlier on Friday, representatives for Vanguard and E*Trade said that they had not. Knight Gives "All Clear" Sign to Clients. On Thursday, Knight asked some of its clients to stop sending it orders, while it retested its systems.  By Friday, Knight executives were calling other trading shops, to assure them that it had locked up financing to operate throughout the day and asked them to resume routing client orders. Knight also contacted a number of potential buyers for at least some of its businesses, as it raced to stabilize its finances through the weekend. Knight and its advisers have been soliciting potential suitors for various parts of its businesses, including rivals like Citadel and Virtu Financial, according to people briefed on the matter. For further details, go to:  [Dealbook, 8/3/12].