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FBN's Charlie Gasparino on new details of the trading glitch that doomed Knight Capital.
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I don't think.
Thanks very much -- cold and we got breaking.
News on that 440 million dollar trading loss -- Knight capital good could come cost the company even more that Charlie got Reno first report that -- -- shopping itself.
And that the loss would be -- -- hundreds of millions of dollars -- now got new details on the trading glitch that doomed in this firm Charlie.
-- -- enough we thought the trading having the high end of the trading loss yesterday was.
300 million dollars an -- -- fifty this is a pretty bad situation we should point out that.
Little bit of background on exactly what took place -- was supposed to execute a five.
Billion dollar trade.
That trade was supposed to take -- take place.
Over from what I understand weeks maybe as much as five weeks it was X -- Q did in twenty minutes of obviously.
It was a huge mistake the SEC New York Stock Exchange when it came in -- agency enough.
Knight was trying to get them to DK the trades didn't cancel -- start from zero.
Under the new trading rules I think they'd -- -- -- following the flash crash following the FaceBook IPO could not do that.
Hence a 450 million dollar -- about.
From what I understand that's about half of their initial market cap.
Before so this is accompanied deep trouble.
And because of that this is what we understand first off they are desperately trying to shop the -- five find a buyer.
Where they looking for wanna stand it's going out widely -- also looking at financing.
How to get through this very critical stage which is the next 48 hours.
Who might buy them and that would be I think that the preferred choice for Tom Joyce the CEO.
Of Knight capital than not the name that I keep parent out there we should point out that this name has not commented -- either as night.
Is Citadel's Citadel investment -- Griffin's firm with calls out to they have not they have not called -- why is that a legitimate place to go.
So the bill has a business like this -- they -- and on this would be supplemental.
The Citadel is business we should point out that if they didn't buy it they would not buy it at a very expensive level.
This would be.
A fire yard -- from what -- -- be very depressed just based on.
-- balance sheet and you know would could -- go with the stock's trading today the stock is pricing in more more -- so that's what we are right now.
This is a situation that will -- more in the next 48 hours I should also point out that I when I talk to people this is not quite a Lehman situation.
I remember back in 2008 when I was covering Lehman and and the stock at about 350 that day where they came out with earnings and no -- plan for the future.
You saw the stock go into -- death spiral at 350 we you knew they were toast at that point.
They went out they did would nights and then went -- they try to shop themselves by Friday and that of of the net that was on the Thursday Friday of that week that the people we back in September 2008.
They were toast.
This company -- I didn't just take it for what it's worth I've -- -- sources of deal Wall Street sources these are people who are friends with Tom Joyce might be able to -- through this a little bit.
If they can get some time JPMorgan Charlie you're part of that doesn't -- wealthy get the financing from them.
I can -- -- on the table from what I understand it is they're they're trying to do they're doing -- and everything and we'll know more today they'll have an announcement but.
I I believe and I will keep us posted on what's going on.
But if they can -- through this and try to like keep whatever customers now remember yesterday they told their customers to trade elsewhere until they got this sorted out those customers have gone to other places.
Presumably -- coming back -- that echoed back with they can get some of them to come back.
They might be able to -- through this but it's a very difficult situation that's -- Tom choices out there trying to sell itself.
At the worst possible time when the price you get a good -- they're gonna disappear -- if they get bought their Concord company.
You know I guess of the Citadel buys and it'll be an add on to Citadel's business this is not a very good situation the liberal broader terms -- to talk about I mean.
You know is -- good for the markets you know small investors generally don't trade -- -- -- is a wholesale trader where they excuse Trace for Schwab and everything so they don't this fall as though through.
Throughput you don't think about it this way.
This is like -- third thing we've had in in a relatively short period of time -- screw up in technology.
In a relatively short period campaign this flash crash.
Yet FaceBook IPO which was a NASDAQ good trading -- -- at this pastor and and then and then OK you're right before -- luck.
Now and this is over last couple years now.
This -- something interest -- and we accept merits of liquid and on one day and he said -- Charlie.
SEC's -- -- times and devoted to insider trading all this stuff.
You you wonder if they didn't do enough in terms of market structure in terms of you know one of the things a small investor wants with a sells -- -- she sells a stock is no kind of got executed right things happen and make the technology is gonna make it work.
This has the SEC kind of dropped the ball on this -- this is for in a very short period of time.
And -- capital when they're gonna do this billion dollar trade they wanted to do over a period of ideally.
Five billion over a period of weeks.
And and they did it all it within twenty minutes.
I would have thought that -- -- -- -- some -- to a dark fools like liquid net because sadly people can't track was Knight capital to that do these trades -- its own firm for others could see on my capital selling the.
Out of the stock you know I don't think you can some I mean because surmise a lot of things -- and then it's a legitimate question I'm just saying that I don't know if we don't know enough about this you know.
We do -- -- -- was huge we know was executed on a 148 to the stocks right it is involved RJ forty stocks.
We do know I mean I'm -- confident my -- was supposed to take over take a theater over a period of weeks.
We don't know like a lot of others and other software vendor doing it and we don't know if it was really just software.
Or some guy put it in -- and in the software did something right this stuff is all when they when people say -- -- Tom Joyce was.
Was has been out there talking about software glitches he can be easily gone public with this but.
There's always a gray area involved and I I take this is going to be a story that we'll know more in the next 48 hours obviously the overriding story does the firms about I don't think.
Was I don't like saying that but it's you know if you -- you don't want -- add these sort of unnecessary rumor and you know rumor into the into the into market but I don't think you can surmise anything -- into the stock trading at 350 the market is clearly -- Charlie great stuff a lot of a lot of breaking news mean classic -- gallery hours evidence when now Charlie thank you thank.
