Posted on 08/02/2012 7:02:55 AM PDT by mykroar
A day after spooking Wall Street with a massive trading glitch, Knight Capital Group (KCG: 6.94, -3.39, -32.82%) revealed a stunning $440 million pretax loss on Thursday tied to the incident, sending the embattled market maker’s shares plummeting another 58% and searching for an emergency loan from J.P. Morgan Chase (JPM: 36.00, 0.00, 0.00%).
The turmoil has forced Knight Capital to reach out to J.P. Morgan for emergency financing aimed at shoring up the company’s depleted capital base, a source told FOX Business’s Charles Gasparino.
Read more: http://www.foxbusiness.com/industries/2012/08/02/knight-capital-plummets-55-after-disclosing-huge-440m-pretax-loss/#ixzz22OhCrTQ8
(Excerpt) Read more at foxbusiness.com ...
Don't really do any trading myself, but saw this when I was looking for the unexpected unemployment numbers - and thought some would want to comment.
The system is becoming increasingly unstable. The mean time between financial crises is shrinking every day.
Notice that in this case a third of the liquidity disappeared overnight. Think I'll go back and review some of the warnings I've read about using ETFs.
In the long run, if your model is reasonable, you'll be fine.
The models are all reasonable, until they're not. And when they are making 1000 trades a second who is going to decide it is no longer reasonable? And a reasonableness checking module to the system?
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