Knight Resumes Trading in Equities
November 1, 2012
The Americas unit of Knight Capital Group told its clients Wednesday night that it ‘resolved the power outages’ that led it to stop trading in equities, in the wake of ‘superstorm’ Sandy.
In a memo to its customers, the market maker told its customers they could begin routing orders again to its equities trading desk. Knight had instructed them to route away orders involving over-the-counter listings, listed stocks and options, Wednesday morning.
The broker shut down trading in equities after backup power failed at its headquarters in Jersey City, N.J., amid a blackout that followed the arrival Tuesday evening of the massive storm.
In a memo to its staff Thursday morning, Knight attributed the shutdown to low fuel in its backup generators and an “abundance of caution.’’
The company said its supply tanks never ran out of fuel, but that at low levels of fuel, “generators can experience disruptions.”
The generators experienced difficulty and went down at about 11:45 a.m., Knight said, and came back up at about 2:00 PM. Battery power was utilized in the mean time.
The power generation problem led to the instruction to its customers to route orders to other trading desks.
“Out of an abundance of caution and to protect our clients, a decision was made to instruct clients to route away,’’ Knight said, in its internal memo.
The company said it is “business as usual” today, that it continues to operate under generator power in at its Jersey City facilities and “all fuel related issues have been addressed for the foreseeable future.”
This is the second significant technical disruption of its operations in 60 days.
On August 1, Knight erroneously sent a flood of erroneous orders onto U.S. stock markets.
That flood cost it $456.7 million and threatened its survival. A set of investors, led by Jefferies & Co., rescued the firm. Previous shareholders lost 70% of their stake in the company, after the capital infusion.
After that near-death experience, Knight commissioned a professional review of its technical systems by an outside consultant, IBM. That review was expected to be in Knight's hands “by Halloween,’’ according to its chief executive, Tom Joyce.
Knight has not yet received the report. "The review is ongoing,'' said managing director of media relations Kara Fitzsimmons.