The latest black eye for U.S. equity markets is proving a body blow for Knight Capital.
Bloomberg reports that shares of the Jersey City, New Jersey-based firm plunged 33 percent, the most ever, in record volume Wednesday as investors speculated on how much a breakdown that whipsawed owners of 140 stocks will cost the company. Its loss may be as much as $170m, according to analysts at JPMorgan Chase.
Knight, led by 57-year-old Chairman and Chief Executive Officer Thomas Joyce, has been at the center of U.S. equities for a decade as one of the biggest market makers, executing almost $20bn of trades a day in June. Its importance was never so visible as Wednesday, when its computers helped spur sudden price swings of 10% or more in dozens of companies.
'This isn’t good for the market overall and it’s not good for Knight', Sang Lee, managing partner at Boston-based research firm Aite Group LLC, said in a phone interview. 'They took a beating in their share price. It’s not going to devastate the business of Knight since they’re a major market maker in equities. But when you’re a major player like Knight, mistakes will have a more expanded impact'.
Knight’s stock tumbled $3.39 to $6.94, its lowest close since 2003, as a record 64m shares changed hands. More than $300m was erased from the company’s market value to leave the shares worth $682m.
As stock swings mounted Wednesday, Knight told some clients of its market-making business that a 'technical issue' was affecting its systems and advised them to route orders elsewhere, according to e-mails from spokeswoman Kara Fitzsimmons Wednesday. The issue was confined to that unit and its other operations were unaffected, she said.
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