It will be obvious in hindsight that the stresses at the edges of our obviously broken financial markets caused outlier events both incompetent and malevolent in nature. The latest bit of crazy comes from yesterday’s open on the U.S. markets where the HFT trading systems of Knight Capital (NYSE:KCG) went haywire and bought a reported $5 billion in stock across 150 companies. This mistake will likely cost the company, well, the company. The early estimates are that it will take a $440 million cash infusion to cover the margin liability, presumably.
The trades in question were supposed to be phased in over a few months not a few minutes but the computers obviously either had a mind of their own, and we’ll look back on August 1st 2012 as the day that SkyNet really did go live, or someone at Knight has the fattest darn finger the world has ever seen. I’d make a Monty Python reference but my stomach’s already upset from the thought of these idiots having the ability to trade in these markets in the first place.
Meanwhile regulators at the SEC were seen watching the Olympics. I’m sure someone will get a small fine and a press conference will be held. I’m sure JPMorgan (NYSE:JPM) will be happy to help in any way they can. At the very least Knight is going to need someone to come in and prop them up.
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