Knight Capital Group CEO Thomas Joyce estimated last week's trading loss will be $270 million after taxes and told clients the firm is “in good standing” with clearinghouses.
“Our review of the Aug. 1 technology issue is ongoing and we take this matter very seriously,” Mr. Joyce wrote in a letter obtained by Bloomberg News and confirmed by Knight Capital spokeswoman Kara Fitzsimmons. “We are in discussions with external advisers in an effort to effectively assess the situation, in addition to our internal review.”
The post-tax loss compares with a previously disclosed pretax loss of $440 million. The letter comes a week after Knight was driven to the brink of bankruptcy after a technology malfunction spewed orders into the market by mistake. Mr. Joyce told clients that the company is in talks with outside advisers as it works to prevent another error.
Knight was saved from collapse on Monday, when it received a $400 million cash infusion through the sale of convertible securities from a consortium of investors. Getco, Blackstone Group, brokerages Stifel Nicolaus and TD Ameritrade Holding, as well as Stephens Inc. and Jefferies Group invested in the rescue funding, according to Knight Capital. The investment will give the firms a 73% stake in Knight once the shares are converted into common stock.
Knight's relationships with the Depository Trust & Clearing Corp. and the Options Clearing Corp. remain intact, according to the letter from Mr. Joyce.
“DTCC has been in near-constant communication with Knight since last Wednesday and throughout much of the weekend to address the myriad of issues arising from this situation,” Michael C. Bodson, president and CEO of the clearinghouse, wrote in a letter Monday to clients, a copy of which was attached to Mr. Joyce's communication. “DTCC has been in close touch with our regulators and our board during this time to keep them fully apprised of our discussions with Knight and the actions we have undertaken to provide stability to the markets during this period of uncertainty.”
NYSE Euronext said in a statement Tuesday that Knight will resume its duties as a designated market maker on the New York Stock Exchange on Aug. 13. The exchange said that all of the firm's securities, staff, operations and systems will return to Knight after being temporarily reassigned to Getco earlier this week.
