Trading firm and market maker Knight Capital Group Inc. (NYSE:KCG) on Wednesday reported a loss of$389.9 million or $6.30 a share in the third quarter, due to a software malfunction in August that nearly pushed it towards bankruptcy.
Knight said it had earned 1 cent a share, and was hurt by shaken confidence in the firm and by soft market conditions.
The net results included $461.1 million in losses associated with the glitch on August 1.
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The company went live with new trading software that had not been properly installed.
The new software was not compatible with the old code (that should have been actually deleted) and when orders were punched in, early in the morning, it resulted in erroneous orders being input into the system and trades were executed at irrational prices.
It left Knight with a massive position it has to offload at a loss.
The company had to take on board several investors, who bailed it out with a $400 million investment, as otherwise it was staring at the prospect of bankruptcy.
The investors included The Blackstone Group L.P.(NYSE:BX), Getco and financial services companies TD Ameritrade Holding Corp.(NYSE:AMTD), Stifel Financial Corp.(NYSE:SF), Jefferies Group, Inc.(NYSE:JEF) and Stephens Inc.