Knight Expects Tech Review By Halloween
September 24, 2012
Knight Capital has consolidated its financial, technological and general operations under a single executive, moving its chief technologist to a new role.At the same time, chief executive Tom Joyce said he expects IBM’s review of the company’s systems to be complete "by Halloween.”
He will oversee the firm’s technology, operations, finance, accounting, risk management, business development, staff development and investor relations.
Executive Vice President Steven Sadoff, who oversaw the building of Knight’s trading floor technology and communications infrastructure, will oversee the company’s correspondent clearing, prime brokerage and futures businesses. He will no longer oversee operations, services or technology.
Managing Director Brian Strauss also has been installed as the company’s newly-created Chief Risk Officer. He will manage the firm’s credit, market and operational risks.
The moves come 50 days after the market maker nearly melted down, in the wake of a flood of erroneous orders it unleashed onto national exchanges on August 1. The 45-minute flood cost the company $440 million and 73% of its existing shareholders’ equity. A series of investors, led by Jefferies & Co., rescued the firm from its financial crunch.
"After careful consideration, we concluded it was best to consolidate responsibility for all financial, operational and technology risk under a single executive," Joyce said, in a statement.
Joyce also told Traders Magazine at the Security Traders Association annual conference in Washington, D.C., Friday that IBM has begun its review of Knight market-making and computer systems.
The cause of the flood of erroneous orders “was a software installation issue, co-developed by Knight for the inception of a new program at the New York Stock Exchange was not properly installed,’’ Joyce told a Barclays Capital conference on September 11. “Instead old dormant code which had an undetected bug that was supposed to be deleted prior to August 1 remained in place. The dormant application awoke. In effect, we kicked the beehive.”
Joyce said he expected to have IBM’s review of Knight’s technical systems in hand “by Halloween,’’ which is the last day of October.
The Nasdaq Stock Market also picked IBM to review its systems, after the disruption May 18 of the Facebook initial offering of shares to the public, involving its IPO Cross system.
That review was due in to chief executive officer Robert Greifeld by August 4. But Nasdaq has not acknowledged its receipt, to date.