Market Insider

Knight Glitches Latest in String of Trading Snafus

Max Viscio

On Wednesday, a series of trading glitches on the New York Stock Exchange spiked volume to unusually high levels, and led to numerous trading halts just after the opening bell.

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The issues arose from a routing error by Knight Capital, one of the industry’s biggest market-makers, ultimately affecting roughly 150 stocks.

The New York Stock Exchange later announced that it would affected, including: Wizzard Software, Quicksilver , E House , American Reprographics and China Cord Blood .

The incident was another mark against the industry, at a time when investor confidence is running low. Knight and has not yet disclosed the financial impact from the trading, but traders expect it to take a more than $100 million hit.

The technical snafu at Knight is also the latest in a series of high-profile trading issues that have hit markets.

  • The Facebook IPO. The May debut was one of the most anticipated events of the year. A series of computer glitches at the Nasdaq wreaked havoc with the stock’s open, costing the exchange, Facebook investors and its market makers hundreds of millions in losses. The trading mistakes shattered confidence in the stock, according to bankers, and helped set the stage for one of the worst opening performances for an IPO in history. Currently, Facebook shares are more than 40 percent below their offer price. (Knight lost about $35 million from the Facebook debut)
  • The Botched BATS IPO. The high frequency trading exchange had to cancel its own public debut after the exchange it runs experienced “system issues.” On March 23, an erroneous trade on the BATS exchange took 9.4 percent off the price of Apple. The technical issue spread to BATS’ stock itself, leading management pulled the plug on its IPO later that day.
  • Mizuho’s legendary 2005 foul-up. This remains one of the most costly trading mistakes of all time. For the Japanese securities firm, it was supposed to be a simple trade: sell one share of job recruiting company J-Com for 610,000 yen. Instead, it put in the order as: sell 610,000 shares for 1 yen each. A seemingly simple numerical switch turned into a disaster for Mizuho, which ended up selling more than 41 times the amount of shares of J-Com than actually existed. What was done could not be undone and Mizuho ended up losing around $225 million.
  • The Flash Crash of 2010. This is the granddaddy of all glitches: At around 2:42pm ET, the market plunge roughly 600 points within a matter of minutes and by 2:47pm ET the loss for the day stood at nearly a thousand points. The issue spawned a massive market fallout, leading to multiple investigations, congressional hearings, and reforms to how many markets function.

— By CNBC's Max Viscio

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