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Knight Rises - Algo Crushed Firm Has Secured Line Of Financing WSJ Reports

Tyler Durden's picture




 

Since closing last night, the stock of Knight Capital has moved by nearly 100%, touching on under $2 in the after hours session, and now trading well over $3. The catalyst: a report by the WSJ that the firm has obtained a line of credit. Is this surprising? Not at all, and in fact is standard operating procedure by any firm which is buying hours of life in exchange for usurious lending costs. The lender is most likely a firm which will be a key participant in the forthcoming 363 asset sale, who has obtained a supersecured lien on all the firm's assets, and is also priming all of the other creditors of Knight. The question is whether the lender will be happy with what they find as a result of this 24 hour life line. If not - they simply pull the line of cash and the firm files. Think of it as an advance glance into Knight's books. And that glance will likely not reveal much. With rumors that even JPM has now ended lines with Knight, the New Jersey market maker is simply a closed box: no trades coming in or out, and only has housekeeping cash outflows on its books to keep its employees employed and systems running. We wish them luck. They will need it. None of this would have happened if, as we hoped 3 years ago, proactive steps had been taken to eliminate the threat of HFT.

 

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Fri, 08/03/2012 - 09:44 | 2675563 vinu02
Fri, 08/03/2012 - 09:46 | 2675568 malikai
malikai's picture

What really happened to KCG:

http://www.youtube.com/watch?v=eujCeBC4Lh0

The blink of an eye!

Fri, 08/03/2012 - 10:41 | 2675775 sdmjake
sdmjake's picture

Maybe we can build a fire and sing a couple songs...

http://www.youtube.com/watch?v=dsx2vdn7gpY

 

Fri, 08/03/2012 - 10:44 | 2675788 Bananamerican
Bananamerican's picture

"there was a spring in the step of many a ZHer that day..."

Fri, 08/03/2012 - 14:33 | 2676437 LeonardoFibonacci
LeonardoFibonacci's picture

Couldn't have happened to a better bunch of fucking crooks!  I say GOOD!  They fucked everything that moved and then to save a few $100k, they go hire Techs from India to do their HFT Algo programming.  Fucking funny!!!

Fri, 08/03/2012 - 09:44 | 2675565 spastic_colon
spastic_colon's picture

yep BAC probably gave it to them with the conditions you listed

Fri, 08/03/2012 - 13:43 | 2676308 patb
patb's picture

BAC?  No Goldman, so they can cut their throats, raid the customer accounts and have the front running on all the other houses.

Fri, 08/03/2012 - 10:00 | 2675569 LongSoupLine
LongSoupLine's picture

I wish them NO luck.  Fuck those algo churring crooks.  I hope they all have to eat fucking cat food!

 

Note: whomever junked me, thanks...you're right, "cat food" was being too nice.

Fri, 08/03/2012 - 09:46 | 2675570 Jlmadyson
Jlmadyson's picture

Who would give them a penny at this point......

Fri, 08/03/2012 - 10:08 | 2675625 Ignatius J Reilly
Ignatius J Reilly's picture

vultures...  The hangman.... the executioner  Anyone who can rifle through their pockets first once the firm is dead.

Fri, 08/03/2012 - 09:46 | 2675571 slaughterer
slaughterer's picture

giggle

Fri, 08/03/2012 - 09:49 | 2675579 Dr. Engali
Dr. Engali's picture

Better take advantage and sell quick.

Fri, 08/03/2012 - 09:50 | 2675581 slaughterer
slaughterer's picture

sold the news

Fri, 08/03/2012 - 10:15 | 2675655 Dr. Engali
Dr. Engali's picture

Good play. Congratulations.

Fri, 08/03/2012 - 09:46 | 2675573 Turin Turambar
Turin Turambar's picture

The only luck I wish them is bad luck.  Good riddance.  Now if only the rest of the HFT bot manipulators could be removed from the market.

Fri, 08/03/2012 - 10:02 | 2675588 Mercury
Mercury's picture

Most of Knight's employees are hardly masters of the universe or crony capitalists. 

It's unlikely that any municipal employees will ever find themselves driving home as nervous and afraid as these people will be tonight when their employers suddenly find themselves teeing up a bankruptcy.

My sympathies are somewhat tempered however by memories of the complete and total assholes I had to deal with at NITE (in the pre-HFT days) when they dominated many OTC names and ripped eyeballs out with impunity and glee.

 

Fri, 08/03/2012 - 10:11 | 2675637 Ignatius J Reilly
Ignatius J Reilly's picture

I believe "just following orders" has now long since been eradicated a valid, plausible, and forgivable excuse.

Fri, 08/03/2012 - 12:54 | 2676184 Mercury
Mercury's picture

We all can't have saintly employers who declare that they "do no evil".

Fri, 08/03/2012 - 13:01 | 2676194 Ignatius J Reilly
Ignatius J Reilly's picture

or "God's work"  ;-)

Fri, 08/03/2012 - 10:50 | 2675811 Bananamerican
Bananamerican's picture

"Most of Knight's employees are hardly masters of the universe or crony capitalists"

..and yet they work(ed) there....

Most of the demons shoveling coals in hell are actually "pretty good guys once you get to know 'em" too, i'm sure.

Fri, 08/03/2012 - 13:45 | 2676312 patb
patb's picture

give it some time,  lots of california cities left to file bankruptcy.  Obama is doing a great Hoover impersonation.

Fri, 08/03/2012 - 09:49 | 2675576 Benjamin Glutton
Benjamin Glutton's picture

The very notion that algo driven computer trading firms receive a credit rating above CCC, when they are a mere 1/2 hour away from bankruptcy at any given moment, is laughable at best.

Fri, 08/03/2012 - 09:53 | 2675589 Jlmadyson
Jlmadyson's picture

Corruption much like 2008 ratings in that regard.

Fri, 08/03/2012 - 10:10 | 2675635 Hype Alert
Hype Alert's picture

Why?  What could possibly go wrong?

Fri, 08/03/2012 - 09:50 | 2675580 adr
adr's picture

I kind of figured I should have thrown $50k into Knight stock. The death spasms are always good for 300% gains before the end. Look at Kodak. You just have to be smart enough to sell for a gain and not wait too long.

Unfuckingbelievable.

Fri, 08/03/2012 - 10:20 | 2675645 Nadaclue
Nadaclue's picture

I did that with a trucking company about 10 yrs ago which was in serious sheep dip. Lotto ticket style and unconfirmed news that they were being bought out. This was on a Thursday after the bell, rode it up on Fri scooped half my profits and let it ride.

The company BK'd Sunday night and I lost $. I still do that but never hold over a weekend, especially with Knight. Ah the days of young, dumb and full of shiite.

Wisdom comes from experiencing mistakes first hand I guess.

Fri, 08/03/2012 - 11:07 | 2675865 Wannabee
Wannabee's picture

Up arrow for your last sentence. Well said.

Fri, 08/03/2012 - 09:50 | 2675582 The Wizard of Oz
The Wizard of Oz's picture

BULLISH!

Fri, 08/03/2012 - 09:51 | 2675584 LoneStarHog
LoneStarHog's picture

Screw All These Damn Blanchard Advertisements For The INTELLIGENT Investor!!!

The INTELLIGENT investor knows that the advertisement which reads, "Who Do You Invest In Gold For?" is so damn illiterate and must be a product of the public education system.

Change the damn copy to, "For Whom Do You Invest In Gold?"

Damn!

Fri, 08/03/2012 - 10:11 | 2675640 slewie the pi-rat
slewie the pi-rat's picture

nobody in his right mind would buy a pencil from those ignorant fuks

the ads look like something from a dentist's office for some nanny freaks with paper assholes

Fri, 08/03/2012 - 10:13 | 2675648 slewie the pi-rat
slewie the pi-rat's picture

p.s. :>  good moarning, comarade BiCheZ!

Fri, 08/03/2012 - 09:51 | 2675586 mrfreeman
mrfreeman's picture

What I don't understand is how do these algos work?  Is each one written specifically for each company by themselves or are they using a standard one written by someone else?  Because if so, the same problem could affect somebody else couldn't it?  Whatever fault caused this could happen again.  I'm amazed that something like this doesn't happen all the time. 

Fri, 08/03/2012 - 10:07 | 2675623 YuropeanImbecille
YuropeanImbecille's picture

The big guys have their own, and the idiots use "off the shelf" bullshit.

To understand the power of algos search on altavista or bing for something, and then search for the same thing on google. Google algos and DM techniques are much stronger and accurate.

 

 

There are different type of 'bots' or expert systems as the technical term goes.

here is a "HFT explained" http://www.youtube.com/watch?v=NzfmT4vGXZY

 

Fri, 08/03/2012 - 10:04 | 2675593 LawsofPhysics
LawsofPhysics's picture

Sell the news, and rather quickly.  What a great pop in the energy sector.  That's it.  Selling, going to enjoy a long weekend.  You guys play nice now.  Later.

Fri, 08/03/2012 - 10:11 | 2675641 spastic_colon
spastic_colon's picture

if anyone is short this market the remainder of the year your're going to get buttf%#ked, the PTB has made sure

Fri, 08/03/2012 - 09:54 | 2675594 oogs66
oogs66's picture

algos or hft's or whatever they are need to be contained...

Fri, 08/03/2012 - 09:57 | 2675597 fourchan
fourchan's picture

the algo worked perfectly after all.

 

Fri, 08/03/2012 - 09:59 | 2675599 whoopsing
whoopsing's picture

What was that word yesterday ? Millipenny's ?

Fri, 08/03/2012 - 10:44 | 2675787 FrozenOut
FrozenOut's picture

That brings to mind images of Miss Moneypenny and Pussy Galore. Oh, to be 11!

Fri, 08/03/2012 - 10:00 | 2675604 Hype Alert
Hype Alert's picture

Who cares?  HFTs are great!  It's only muppets getting scammed anyway. The elite view is if they are in a market they don't understand and aren't co-located, they deserve to be skinned alive.

Have we hit 1400 yet?

Fri, 08/03/2012 - 10:03 | 2675606 MonsterZero
MonsterZero's picture

No mention of their other reverse mortgage business unit? Hmmmm

Urban Financial Group, acquired by Knight in 2010, is a leading originator of reverse mortgages, which allow elderly homeowners to cash out the equity in their homes while living there.

"Knight's loss related to an equity trading technology issue Aug. 1 did not impact Urban Financial's capital base," Knight spokeswoman Kara Fitzsimmons said.

Urban Financial averaged about $140 million in originations per month in the second quarter, Knight executives said during a July conference call. It also ranked fourth in combined wholesale and retail originations during the first half of 2012.

During the second quarter, Urban Financial issued $427 million in bonds backed by reverse mortgages, or 20 percent of industry issuance, the company said on the call.
http://in.reuters.com/article/2012/08/02/knightcapital-mortgage-idINL2E8...

Fri, 08/03/2012 - 10:48 | 2675805 FrozenOut
FrozenOut's picture

Why have these thieves been allowed to propagate falsehoods like "cash out your equity." You are not doing that, you are taking on secured debt. There is no "equity" involved.

Fri, 08/03/2012 - 10:05 | 2675620 GMadScientist
GMadScientist's picture

I see Warren seizing on this like a deceptively old vampire springing into the fray.

Fri, 08/03/2012 - 10:10 | 2675630 Atlantis Consigliore
Atlantis Consigliore's picture

NO WIRE OUTS ALLOWED THIS TIME FROM PENSON Promise?  Like MF?

As long as the Penson Seg Funds accounts are segregated and file chapt 11 and are whole; 

just 24 hours to long over a weekend?  what can go wrong on Monday?

the regulators are in the offices working very hard LOL

Not another MF Global another time ? cant be allowed

Fri, 08/03/2012 - 10:13 | 2675647 Getting Old Sucks
Getting Old Sucks's picture

"no trades coming in or out, and only has housekeeping cash outflows on its books to keep its employees employed and systems running."

Are accounts frozen or did they give clients their money back?

Fri, 08/03/2012 - 10:17 | 2675662 slewie the pi-rat
slewie the pi-rat's picture

TBD

Fri, 08/03/2012 - 10:19 | 2675661 ThisIsBob
ThisIsBob's picture

Fuckem.  Die in a fire Knight, and the rest of them too.  Techno-bandits chiseling .001 off of every trade because they have figured out a way to exploit a weakness (latency) in the system.  The bloody exchanges won't fix it, indeed, they facilitate it, because otherwise they wouldn't have any customers.

Fri, 08/03/2012 - 10:22 | 2675688 Jlmadyson
Jlmadyson's picture

One day line of credit?

Can this get anymore lame.....

Fri, 08/03/2012 - 12:02 | 2676025 freedogger
freedogger's picture

I have a new unfunded account with optionsXpress.ca. They do their Canadian money transfers entirely through Penson Financial Services Canada inc. Connecting the dots leads to Knight from what I can tell. 

Methinks it be wise to not transfer money to the account till its sorted. Any thoughts? Fee free to blast away. Just to emphasize, this is a small account again, my other larger account was recently lost in a boating accident...

 

 

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