[ by Melanie Gretchen ]

Knight Capital Group reported on Thursday a computer glitch that echoed around the world.  The firm lost $440 million, or $10 million a minute, when it sold all the stocks it accidentally bought Wednesday morning because a computer glitch – exceeding the company's Q2 revenue of $289 million.

A Dark Knight? As a result, the firm's money it uses to conduct its business has been "severely impacted" and the firm began "actively pursuing its strategic and financing alternatives."  By premarket trading on Thursday morning, shares of the firm were down 60%, following a 32% slide on Wednesday.

"With the events of yesterday you have to question if this is the beginning of the end for Knight." -- Christopher Nagy, founder of the consulting firm KOR Trading.

The Event. On Wednesday, the firm's computers rapidly bought and sold millions of shares in over 100 stocks for about 45 minutes after the markets opened.  This activity drove the value of many stocks up, which came back to the firm when it sold the overvalued shares back into the market at a lower price.

Technology. Since then, the firm attributed the problems to new trading software, which had been installed.  However, in addition to costing the firm $440 million, the event also succeeded in shining a spotlight on the risks of computerized trading that has progressively dominated the nation's stock markets – specifically because Knight had, up until this month, benefited from the changing landscape's increased speed.  Just this May, CEO Thomas Joyce criticized Facebook, after the social media network's botched IPO cost Knight $35.4 million in losses because the trades the company was making in Facebook shares weren't registered by Nasdaq for hours.

Going forward, the large retail brokers would likely be able to find alternatives if Knight is unable to continue taking in new business, according to KOR Trading's Mr. Nagy, who used to work for TD Ameritrade.  In addition, Knight has "unmatched" connections with smaller banks and brokers, and those smaller firms may have trouble immediately finding a replacement for Knight.  To date, none of its customers had been hurt by the faulty trades, the company said.  [C-I Note: Well, that's reassuring – in context.]

For further details, go to [Dealbook, 8/2/12].