Knight Stops Trading Equities, After Backup Power Fails
October 31, 2012
Knight Capital Group Inc. shut down trading of equities Wednesday after backup power failed at its headquarters in Jersey City, N.J., amid a blackout following Hurricane Sandy.
No new orders for stock trades are being accepted, according to a memo from market maker Knight, which almost went bankrupt in August after a computer error flooded the market with unintended transactions.
The company’s BondPoint trading platform was switched to a backup data center in Purchase, New York, and not affected, managing director of media relations Kara Fitzsimmons said by phone.
“Power went down at about 11:45,” Fitzsimmons said. “Other regional offices are trading,” including Knight’s institutional fixed-income business in Greenwich, Connecticut, according to Fitzsimmons.
Knight shut down client orders related to institutional sales and trading and market making in all exchange-listed and over-the-counter stocks and options. Fitzsimmons could not be reached by sister site Traders Magazine at 2:30 p.m. to see if Knight had resumed trading in equities.
As it happens, Knight chief executive Tom Joyce told Traders in September that the firm expected that a review of its technical operations was expected from IBM “by Halloween.”
Knight is one of dozens of Wall Street firms being affected by power outages after Hurricane Sandy flooded parts of New York and New Jersey on Oct. 29. Citigroup Inc., the third-largest U.S. bank, said its office at 111 Wall St. will be unusable for weeks and that a building housing senior capital-markets executives lost power. U.S. equity markets opened today after the storm forced exchanges to shut for the first two days of the week, the only back-to-back closures related to weather since 1888.
“Due to a building emergency (power issues), Knight Capital Americas is asking you to seek an alternate destination for the order handling and execution of your OTC, Options and Listed orders until further notice,” said a memo to clients, confirmed by Fitzsimmons. “All computer interfaces with Knight will be shut down with no new orders, both by phone or electronic, being accepted at this time.”
A technology error Aug. 1 bombarded equity exchanges with erroneous orders, leading to a $457.6 million loss and sending Knight, one of the largest traders of U.S. shares by volume, to the brink of insolvency as customers routed orders elsewhere and the shares plunged 75 percent in two days.