Knight Capital Gets Hammered Following $440M Flash-Crash Loss
NEW YORK (TheStreet) -- Shares of Wall Street broker and market maker Knight Capital Group (KCG) were being slaughtered in premarket trading Thursday after the firm announced a $440 million pretax loss tied to the latest stock market flash crash.
Shares plunged as much as 58% in premarket trading following the loss announcement.
The Jersey City, N.J., broker said that its market making unit had suffered a "technical glitch" Wednesday morning, which had caused a high level of volatility for a large number of individual stocks, some of which saw their trading halted. The Securities and Exchange Commission said it was investigating the problem.
"Knight has traded out of its entire erroneous trade position, which has resulted in a realized pre-tax loss of approximately $440 million," the firm said in a statement Thursday morning. "Although the company's capital base has been severely impacted, the company's broker/dealer subsidiaries are in full compliance with their net capital requirements. Knight will continue its trading and market making activities at the commencement of trading today."
More concerning to shareholders, however, was the point that Knight was "actively pursuing its strategic and financing alternatives to strengthen its capital base," according to the statement.