Companies

Knight Is Still Trying to Find Out What Went Wrong: CEO

Knight Capital Group still does not know what caused the trading glitch last week that sent the company into a near-death spiral, but is taking steps to make sure there isn't a repeat performance, CEO Thomas Joyce told CNBC.

A trader works at a Knight Capital Group Inc. post on the floor of the New York Stock Exchange.
Jin Lee | Bloomberg | Getty Images

Speaking just a short time after the company announced a $400 million dealthat keeps the troubled trading company afloat, Joyce pledged in an interview that the trading firm protected its clients and is taking responsibility for the mistake.

A software error triggered a sharp rise in volume just after the opening bell Wednesday, creating price distortions on nearly 150 stocks. Knight's share price has since plummeted, unabated even by Monday's recapitalization arrangement.

"Sadly it was a very simple breakdown — a very large breakdown — but a very simple breakdown," Joyce said on the "Squawk on the Street" program. "It was an issue with trading technology. You can be assured that now that we are doing an internal investigation to identify what truly happened and we can source the facts behind it."

The Knight snafu struck another blow against investor confidence in a market haunted by problems with high-frequency tradingprograms that began in earnest with the May 6, 2010 Flash Crash, which sent the Dow industrials plunging nearly 1,000 points in a few minutes.

Since then, the market has seen blowups with the BATS tradingplatform initial public offering, the Facebook IPO fiasco on the Nasdaq platform, as well as an assortment of other mini-Flash Crashes on individual stocks.

Joyce pledged that his firm would try to plug whatever holes are in its system.

"You're probably not going to be surprised to learn that since that large mistake Wednesday morning we've been focused on a couple other things rather than simply a post-mortem," he said. "So we're going to be into the post-mortem quickly and we're going to come out with solutions as to how we can enhance the system and enhance the environment here."

He stressed that even though shareholders will take a beating on the rescue deal, the company will survive and is "in arguably better financial shape than we were a week ago." Joyce made an unsuccessful effort over the weekend to get the Securities and Exchange Commission to cancel many of the faulty trades involved, according to a Wall Street Journal report.

A consortium of investors will buy convertible shares that will work out as 267 millions shares of common stock, giving them about a 70 percent stake in Knight and substantially diluting current shareholders.

"We took the consequences," Joyce said. "None of our clients took the consequences. More importantly, the industry didn't suffer."