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FBN's Charlie Gasparino on a Knight Capital loss that could wipe out most of its specialist unit.
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Advocate went so everyone -- about the massive technical glitch that.
Almost Sunday night capital last Wednesday bank that was the only not the only screw up that occurred last week Charlie Gasparino has the latest detail on the -- much smaller loss of one net.
-- -- specialists see it on not.
The stock was ESB don't ask me you know what they do I just know they traded this stock.
What was -- -- is that night specialist -- what is a specialist they match buyers and sellers do do do the Last of the Mohicans on the floor of the New York Stock Exchange.
Which matches buyers and sellers of stocks if you don't use a computer you go to specialist unit and here's what we know literally a day before.
That was Wednesday on Tuesday.
-- specialist unit I eat at 800000.
Dollar 1001000.
Dollar -- us.
But one is pretty big when you look in the context of night -- unit.
That is a -- to basically could wipe out all its yearly profits which a lot of people tell me puts the -- in jeopardy.
It was a mistake basically they -- they basically -- would they were long the stock they they thought they were they need known.
A mistake human error not they had a split a loss -- another firm.
And -- -- and and there you have 800000 dollars on the fact that he is the basically when you -- into a rebalancing of the S&P 500 stock goes up.
He has he has -- got put -- one of those rebalancing but the next day goes down that's usually the trading pattern.
They do not know they were -- the stock what was going down suspect computer error him better.
From what I understand it's a screw up it's a pretty big screw up by the way we should point out that put this in context the 400 million dollar loss.
It was -- destroyed the firm without bail out.
The value at risk that night states to analyst what is that that's that's what they say they basically could lose in a single day.
You know it's not like what will put him out of business but that's.
Essentially everything -- if everything goes wrong they could lose so you think about it 400 times their value of risk their value risk is like one to two million dollars a day.
Okay.
This is in that context this is pretty significant this was one place that blew out 800000 dollars.
I think it's an interest -- story because two things you know I'm here to basically define what Wall Street does gives you an insight into all that could go wrong -- a firm.
But not just the guy.
Screwing up on a computer program by to -- -- you -- -- their filings I stand correct once again.
They said it was a mixture when -- finally had a file with the SEC they're there they are I guess whatever they had to file their official documents.
On the bailout they said it was a combination of human and computer errors itself -- statement.
DC -- send a -- to go wrong location at the end of the day that they thought they were trading buckles and instead they were trading at the New York Stock Exchange on the -- has a black who you know.
That's for the entry I guess they were trading but they were trading and electronic platform as opposed to trading -- thought they were trading -- independent -- I don't with the order -- the filled much.
-- whatever was it was a combination of humans and connectors and that's what I said initially even though Tom Joyce initially said it was just a computer error.
I knew wasn't and so you -- you heard it here first but number two I think what I'm trying to do here with a story like this show.
When you run -- Wall Street firms about a million things that could go wrong right one of the things you don't want to go wrong.
These what happened that happened to them yes you're gonna lose money on a trade and bodily it's a lot that's -- that's a big loss for that specialist unit.
They're still tell us on the record that they have no plans to crush it kill it shut it down.
I doubt that I think when you lose about all of course not they would make between one and two million dollars you're depending on the trading environment you lose half of that or all of it.
Probably gone you we should also point out that now they have to specials units on the exchange get goes in -- -- get go was Malcolm buck is now one of the owners of night.
Each have twenty traders -- you know you think you be some downsizing and this just I think I think it facilitates that.
Downsizing although as you said I mean.
If this air came from software that was you know not operating in the way that they wish someone should have noticed during that period of -- that these traits are going on that is for sure human -- I don't know if you downsize in the base that lets you find an exact -- -- lose the money that went to go get a sandwich while the -- was going -- -- -- sitting at his desk and watching it.
When -- at it when you when you're losing money you know I mean you when you lose have to prompt well your profits -- half.
And by the way -- the put you have to look at the time value money here in order to run a special -- that you literally have to put up.
Hundreds of thousands of dolls made millions of dollars just keeping capitals so when they trade they -- -- some capital as a buffer.
And if you return on equity is like you know that small we only make it a million dollars a year -- put up a 150 million.
Well that's that's a prominent when you'll make have a big loss I think they have a they have a big problem and and you know here's -- thing -- Knight capital we should point out right now new owners are in town.
If that I think is what it looks like today six months from now I'd be surprised I my -- is.
They start selling stuff.
And you know and shunning stuff down and sort of come monetize the place -- a lot of good technology -- I think -- rhetoric of -- interest in buying them and and getting involved and sure that's why they're gonna settle.
I guess freedom thank you.
