Knight CEO Comments On Algo Failure Which Has Cost Him 70% Of His Market Cap In One Day

Tyler Durden's picture

Here are the choice highlights from the interview with Knight CEO Tom Joyce, who is
inexplicably on Bloomberg TV without any clear point, purpose or spin,
and nothing to tell anyone and restore confidence.

  • TECHNOLOGY BREAKS. WHAT HAPPENS NEXT IS HOW YOU ESCALATE IT. WE'RE PROUD OF THE FACT THAT WE ESCALATED TO IT DIRECTLY TO OUR CLIENTS AND GOT THEM OUT OF HARM'S WAY. THERE ARE TWO THINGS WE TAKE GREAT PRIDE IN WHICH IS OUR CLIENTS' FOCUS AND OUR CULTURE WHICH IS INVOLVED WITH COMPLIANCE. WE HAVE A CULTURE OF COMPLIANCE AND CLIENT FOCUS AND WE ASSERTED BOTH OF THOSE THINGS YESTERDAY.
  • IF YOU GET INVOLVED IN THE DAY TO TAKE MINUTIA, THIS WILL GIVE YOU A HEADACHE OCCASIONALLY
  • IT DOES AFFECT THOSE WHO MIGHT LOOK TO BUY KNIGHT CAPITAL STOCK. WOULD YOU BE INTERESTED IN BUYING SHARES OF A COMPANY THAT WITHIN -- WITHIN A DAY OR TWO COULD GET WIPED OUT?
  • OF COURSE NOT, THIS IS AN ANOMALY. YOU CANNOT KEEP PEOPLE FROM DOING STUPID THINGS WHETHER IT IS WRITING IN PERFECT CODA BUYING THE WRONG SOFTWARE AT THE WRONG TIME. THAT IS WHAT HAPPENS WHEN YOU HAVE A CULTURE OF RISK.
  • YOU STAY AWAY FROM THE DAY- TO-DAY MINUTIA AND LOOK FOR THE LONG TERM, AS AN EQUITY INVESTOR, IT WILL WORK OUT.
  • WE'RE OPEN FOR BUSINESS. WE GOT RID OF THE BAD TRADES AND FREE UP A LOT OF CAPITAL. WE HAVE EXCESS CAPITAL RIGHT NOW.
  • JOYCE SAYS 'WE ARE OPEN FOR BUSINES,' 'WE'RE REASONABLY BUSY'

And the kicker:

  • WE NEED TO DO A BETTER JOB ON OUR TESTING ENVIRONMENT.

Translation: we are shopping ourselves right now and unless someone pick us up by end of trading when the margin calls come in, tomorrow's open may be a little problematic. Of course, JPM will mysteriously step up in the last minute and provide a DIP-like loan in the process onboarding all the "segregated" accounts.

  • KNIGHT BONDS FALL 13.125 CENTS TO 70 CENTS ON DOLLAR

Quite soon we may find out what it means to trade in a market which has just lost one of its key market makers, responsible for up to 15% of overall liquidity.