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TD Ameritrade Resumes Trading With Knight Hours Before Credit Line Expires; $440 MM Cash Outflow Looms

Tyler Durden's picture





 

Knight's credit line expires in 90 minutes. All day it has been a dark box, with virtually no trades coming in or leaving. The company is scrambling, so what happens: some much needed good news finally hits the tape following a TD Ameritrade announcement it has resumed trading with KCG. Will others piggyback as the credit lifeline that is keeping Knight alive expires at the end of the day, and the liquidity runs out, or will firms who explicitly are Knight's competitors in a market which has ever less volume leave it out to hang in hopes of picking up its business on the cheap. A 90 minute difference between life and death for a firm in desperate need of many more such press releases.

From TD Ameritrade:

TD Ameritrade Holding Corporation (NYSE: AMTD) today announced that it will resume routing client trades to Knight Capital Group (“Knight”) (NYSE:KCG).

 

“After considerable review and discussion, we are resuming our order routing relationship with Knight,” said Fred Tomczyk, president and chief executive officer at TD Ameritrade. “Our priority has always been the interests of our clients, their trades and their assets. Knight is one of many order routing destinations for us and has long been a good and trusted partner.”

In the meantime, Knight has until Wednesday to put in place a permanent credit facility or it will literally have zero cash to pay Goldman who according to CNBC's Kate Kelly is the firm that unwound Knight's losing trades:

Under trade-settlement regulations, the Knight-Goldman block transaction must settle three business days after the initial agreement, which means the seller must come up with the $440 million in cash by late Wednesday. As of June 30, Knight had about $365 million in cash, according to a securities filing - raising important questions about whether the brokerage firm could generate the additional money by early next week.

Elsewhere the running joke that is the SEC has finally, three days after the fiasco took place, decided to finally say something. So confidence inspiring people can hardly contain themselves from being subpennied to death by Knight's own HFT algos.

"The apparent trading error by Knight Capital Group on Wednesday reflects the type of event that can raise concerns for investors about our nation's equity markets...While Wednesday's event was unacceptable, I would note that several of the measures we instituted followed the Flash Crash helped to limit its impact...We will continue to review what happened and determine if any, additional measures are needed. That process has already begun. In particular, I have asked the staff to accelerate ongoing efforts to propose a rule to require exchanges and other market centers to have specific programs in place to ensure the capacity and integrity of their systems. And I have directed the staff to convene a roundtable in the common weeks to discuss further steps that can be taken to address these critical issues."

Finally a word of caution from Gasparino:

 


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Fri, 08/03/2012 - 14:35 | Link to Comment put_peter
put_peter's picture

Knight going up... market starting to go down... make the connection...

Fri, 08/03/2012 - 14:50 | Link to Comment withnmeans
withnmeans's picture

News in the real world "SPAIN"

900 Billion in debt, says Mariano Rajoy. ITS OUT!!!

 

http://www.typicallyspanish.com/news/publish/article_35465.shtml

Fri, 08/03/2012 - 14:55 | Link to Comment put_peter
put_peter's picture

Are they enslaving themselves for 900BN? Looks pretty cheap to me :)

Fri, 08/03/2012 - 15:17 | Link to Comment fonestar
fonestar's picture

So I wonder what that programmer is going to do now that he has blow 400+ million?  Wouldn't be getting on any company helicopters if I were him..

Fri, 08/03/2012 - 19:12 | Link to Comment Dingleberry
Dingleberry's picture

Maybe this trader and the "London Whale" can start a hedge fund?

Fri, 08/03/2012 - 22:32 | Link to Comment Muppet of the U...
Muppet of the Universe's picture

When BATS fucked up.. 9 seconds.  When Knight fucked up, 50 minutes.  Now which one sounds like an accident and which one sounds like a total load of shit?

Fri, 08/03/2012 - 15:31 | Link to Comment withnmeans
withnmeans's picture

put_peter: Looks cheap for the U.S.A. - your right...

There is a problem that the Spaniards have that we don't "Althought still a major problem none the less in the U.S.A."  They cannot hit the Ctrl-P button, so when you are out of funds, You Are Out Of Funds.

I could only dream of a day when the U.S. was at 900Bn in Debt, still was a nightmare "not a dream".

Spain better hope the German's are willing to write a Big Check...

Fri, 08/03/2012 - 16:56 | Link to Comment HungrySeagull
HungrySeagull's picture

Finally the Market system has turned on it's masters.

 

He he he.

 

Hate to say it, they need to stop HFT trading and return to telephone and whiteboard/markers.

Fri, 08/03/2012 - 21:17 | Link to Comment boogerbently
boogerbently's picture

Knight HAS no money.

They lost INVESTORS money.

Fri, 08/03/2012 - 22:06 | Link to Comment FMR Bankster
FMR Bankster's picture

They made good their screw ups to investors that's why they lost $440 million. Considering they had a book of $1.4 billion at June 30th they may be able to survive. Maybe. But like all leveraged financials it all depends on the quality and liquidity of their assets and how quick they can be turned into cash. Then of course there's that pesky matter of this massive screw up and who would want to do business with them given their system problems. We'll know a lot more by monday.

Fri, 08/03/2012 - 18:14 | Link to Comment El Oregonian
El Oregonian's picture

Not to worry, "Benny-Bucks" will patch things up and will make everything all better...

Fri, 08/03/2012 - 20:36 | Link to Comment Buck Johnson
Buck Johnson's picture

They need that much to keep the game going, and the ECB doesn't have the money.  I knew eventually they would come out and say that Spain needed about a Trillion to be stable.  Everything that we have been talking about for months is true, they have been playing the game of obfuscation and know they can't anymore.

Fri, 08/03/2012 - 15:33 | Link to Comment SokPOTUS
SokPOTUS's picture

...I.T. finally loaded the software correctly?

Fri, 08/03/2012 - 15:41 | Link to Comment put_peter
put_peter's picture

Well somebody found THE lever and GS immediately bought it.

Fri, 08/03/2012 - 15:56 | Link to Comment hoos bin pharteen
hoos bin pharteen's picture

Am I missing something?  Basically, Knight tried to front run their customers and ended up on the wrong end of the trade.  And the so-called "stewards" of those account holders' money (TD Ameritrade) just happily went back to them? 

 

Full retard.

Fri, 08/03/2012 - 16:30 | Link to Comment Bonesetter Brown
Bonesetter Brown's picture

Yes, you are missing something.

Fri, 08/03/2012 - 18:10 | Link to Comment El Oregonian
El Oregonian's picture

Didn't you know that today is OPPOSITE DAY!!!

Fri, 08/03/2012 - 20:32 | Link to Comment Buck Johnson
Buck Johnson's picture

I have links to Charlie Gasparino and he's saying that this "bank" that Knight said they have a line of credit with he can't find at all.  And in his opinion you should really be aware that it is full of it.  Also they have better have the money by monday or they are done.

http://video.foxbusiness.com/v/1769324707001

http://video.foxbusiness.com/v/1769266815001

Fri, 08/03/2012 - 14:37 | Link to Comment sunny
sunny's picture

We are suppose to be in the worst half of the year, a quarter where earnings reports are bad and look-forward estimates are worse, unemployment is going up, where by most common measures we are in a recession with decreasing GDP and the Fed and ECB have both announced they will not ease. 

A trend is defined as a higher high and a higher low over time.  SP500, daily over 2 months:

http://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Index&symb=sp500&x=31&y=12&time=5&startdate=1%2F4%2F1999&enddate=8%2F1%2F2012&freq=1&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=4&maval=50%2C165&uf=512&lf=1&lf2=2&lf3=4&type=4&style=320&size=3&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=11

The Dow and NASDAQ are identical.  Other than the system is corrupt and we've utterly lost any semblance of a free market, what don't I understand?

sunny

 

Fri, 08/03/2012 - 14:40 | Link to Comment SheepDog-One
SheepDog-One's picture

It sure as shit isnt your grand dads market....100% broken fraud. How the hell anything goes on forward from here I have absolutely no idea.

Fri, 08/03/2012 - 15:00 | Link to Comment cougar_w
cougar_w's picture

It's okay. A putrid ball of fecal matter can roll just fine if you encase it in enough plastic resin. Even covers the smell.

Fri, 08/03/2012 - 15:38 | Link to Comment debtor of last ...
debtor of last resort's picture

The black swan flew over your cuckoo's nest a few years ago. You didn't notice it's shadow, because you were reading ZH. 

Fri, 08/03/2012 - 21:20 | Link to Comment boogerbently
boogerbently's picture

LUCK be a "lady" to knight.

Fri, 08/03/2012 - 15:17 | Link to Comment scatterbrains
scatterbrains's picture

so now that they've successfully extinguished all the stops, now what ?  lol takes your times before hitting the bail button.. there's still a few minutes of volume-less levitation here.

Fri, 08/03/2012 - 14:38 | Link to Comment ziggy59
ziggy59's picture

Goldman Charges Knight $440 Million for Unwind

It was Goldman Sachs (GS) that helped Knight Trading Group to unwind its inadvertent purchase of 148 stocks on Wednesday, say people familiar with the matter, and the bank charged the smaller brokerage $440 million for the transaction - an agreement that has left Knight (KCG) scrambling for extra cash.

http://finance.yahoo.com/news/goldman-charges-knight-440-million-1828082...

Fri, 08/03/2012 - 15:02 | Link to Comment bdc63
bdc63's picture

I knew the squid had to have it's tentacle-prints all over this one ...

Fri, 08/03/2012 - 15:55 | Link to Comment Yen Cross
Yen Cross's picture

 They are called " Suction Cups" , silly!

Fri, 08/03/2012 - 20:30 | Link to Comment Freddie
Freddie's picture

Goldman probably planted a stuxent worm on Knight's computers.  Pay up.

Sat, 08/04/2012 - 02:06 | Link to Comment Fail2Deliver
Fail2Deliver's picture

God's work...Bitchez!

Fri, 08/03/2012 - 15:03 | Link to Comment Doomer
Doomer's picture

Oh, and the prices are all probably up since the Squid helped them out.  What a shock!

They would have been better of just holding and praying, if they had (or thought they could get) the cash to settle the transcations.

Fri, 08/03/2012 - 14:41 | Link to Comment fonzannoon
fonzannoon's picture

I am excited to see this thing at 3:59pm. Like slaughterer said who wants to own this thing at the close.

Fri, 08/03/2012 - 14:42 | Link to Comment MillionDollarBoner_
MillionDollarBoner_'s picture

Well lookee lookee!

Goldman again.

How 'bout dat?

Fri, 08/03/2012 - 14:43 | Link to Comment rubearish10
rubearish10's picture

Another bullet dodged! Same 'ole same 'ole. Let's move on to the next catastrophe and BTFD!

Fri, 08/03/2012 - 15:02 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

60 minutes left in the trading day/week. I vote the street will smell the blood in the water and have a feast.

Or.....they can let the carcass rot over the weekend and finish the meal on Monday.

Fri, 08/03/2012 - 15:10 | Link to Comment LeisureSmith
LeisureSmith's picture

They should bring in Boris "The Blade" Yurinov to do some consulting before they move forward.

Fri, 08/03/2012 - 14:45 | Link to Comment Dr. Engali
Dr. Engali's picture

"Our priority has always been the interests of our clients, their trades and their assets"

 

WTF? If that's the case why would you even consider the risk?

Fri, 08/03/2012 - 14:46 | Link to Comment Everybodys All ...
Everybodys All American's picture

Only in this illusion of a market that Bernanke has created could a major market maker be going under over the last two days and the market is up over 225 dow points.

Fri, 08/03/2012 - 14:47 | Link to Comment Jlmadyson
Jlmadyson's picture

Goldman Sachs eh.

The beatings will continue.

Hope and a prayer.

Fri, 08/03/2012 - 14:53 | Link to Comment kito
kito's picture

wait tyler, whose credit line expires? im so confused...are we talking about greece? spain? all of the banks that just received the repo gift?........my head is spinning.....................

Fri, 08/03/2012 - 14:53 | Link to Comment fonzannoon
fonzannoon's picture

doesen't scottrade run some of their business through penson partners which is owned by knight? Does this relationship have anything to do with this decision by scottrade?

Fri, 08/03/2012 - 15:24 | Link to Comment kito
kito's picture

the butler did it....its always the butler..........

Fri, 08/03/2012 - 14:55 | Link to Comment LFMayor
LFMayor's picture

Wasn't their spokesman the same guy who was selling Old Glory Robot Insurance?

http://videosift.com/video/Old-Glory-Robot-Insurance

Fri, 08/03/2012 - 14:58 | Link to Comment cougar_w
cougar_w's picture

You should have seen their stawk price go up on the news. I was tempted to flip some, but with Ebola on the move today I didn't want to come that close to touching a dead thing.

Fri, 08/03/2012 - 15:05 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

You're getting old cougar_w.

The young cat in you would have finished off the carcass before breakfast, then come back to chew on the bones for brunch. :>)

Fri, 08/03/2012 - 16:12 | Link to Comment cougar_w
cougar_w's picture

Ebola. They say your entire colon falls out just before you die. My wife would never let it rest if my colon ever fell out. It would be nothing but bran muffiins for eternity after that.

Fri, 08/03/2012 - 15:04 | Link to Comment q99x2
q99x2's picture

Class action pension fund lawsuits against any individual or corporation that gambles or seeks to conspire to defraud pensioners in the stock markets and/or bond markets.

Stop them. Somebody call the police.

Fri, 08/03/2012 - 15:05 | Link to Comment Atlantis Consigliore
Atlantis Consigliore's picture

More Gold, more physical;  more bond puts.....FED is Weimar II

Fri, 08/03/2012 - 15:05 | Link to Comment CheapBastard
CheapBastard's picture

Why would Ameritrade use them? Sam Waterson won't like this.

Fri, 08/03/2012 - 17:15 | Link to Comment sessinpo
sessinpo's picture

Scottrade also using them. I think they are trying to get an inside track if it collapses. Also, TD Ameritrade is facing an antitrust inquiry, thus they might be trying to play good boy.

 

http://online.wsj.com/article/BT-CO-20120709-712038.html

Fri, 08/03/2012 - 15:05 | Link to Comment whoopsing
whoopsing's picture

I need some Ebola virus infested robot insurance

Fri, 08/03/2012 - 15:07 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

the bought themselves a ticket for the 3PM algo lottery drawing and may be involved in now-standard huddled vaporization and BK scenario palavering by saturday, after morning tennis in the hamptons

oh!  btw~~~don't forget to close your now-compromised money market "cash-like" accounts in all this excrement er, i mean...excitement!  L0L!!!

Fri, 08/03/2012 - 15:45 | Link to Comment fuu
fuu's picture

"now-standard huddled vaporization"

Is that anything like the drum circle on Venice Beach?

Fri, 08/03/2012 - 23:56 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

the one with the tuned heads?

exactly!

Fri, 08/03/2012 - 15:11 | Link to Comment i_call_you_my_base
i_call_you_my_base's picture

Might as well go all in I guess.

Fri, 08/03/2012 - 15:14 | Link to Comment Jlmadyson
Jlmadyson's picture

The way Charlie G sounds they are going to Merryl Lynch this baby if possible heh. A mini Merryl ain't that so 2008.

Look dramatically different next week indeed.

Fri, 08/03/2012 - 15:20 | Link to Comment sabra1
sabra1's picture

take a look at the canadian TSX. total flatline!

 

Fri, 08/03/2012 - 15:17 | Link to Comment toady
toady's picture

SELL SELL SELL!

Fri, 08/03/2012 - 15:18 | Link to Comment Yen Cross
Yen Cross's picture

 I'll bet  "Knight Financial" wishes it was Chick-Fil-A, right about now.? The flow in fast food is probably better!

Fri, 08/03/2012 - 15:23 | Link to Comment 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?

Fri, 08/03/2012 - 15:26 | Link to Comment Whoa Dammit
Whoa Dammit's picture

 

Bahaahaa..The SEC thinks a Knight of the Roundtable discussion will help.

From the ZH post:

"And I (SEC muckety-muck) have directed the staff to convene a roundtable in the common weeks to discuss further steps that can be taken to address these critical issues."

 

Fri, 08/03/2012 - 15:35 | Link to Comment Yen Cross
Yen Cross's picture

Great catch +1. on the canadian tsx.

Fri, 08/03/2012 - 15:35 | Link to Comment francis_sawyer
francis_sawyer's picture

YAWNER on this thread today...

If you want some real action... U need to see how the fans are dicing up OBAMA's comments on TIM TEBOW & the Jets...

~~~

http://espn.go.com/new-york/nfl/story/_/id/8230717/president-barack-obama-critique-rattle-new-york-jets

& don't forget to stop by the Sharapova vs. Serena Williams content...

ESPN is taking 'rayciss' to new levels today...

Fri, 08/03/2012 - 15:51 | Link to Comment robertocarlos
robertocarlos's picture

It's just another small step in the Canadian banks take-over of the USA. They failed the last 3 times but they never give up.

Fri, 08/03/2012 - 15:57 | Link to Comment Yen Cross
Yen Cross's picture

Blame it on the French side of Canada...

Fri, 08/03/2012 - 19:05 | Link to Comment smiler03
smiler03's picture

Almost 100% profit overnight, I missed out. So many losers and winners.

I don't believe anything I read anywhere anymore,  especially ZH which threw KCG into a bottomless cesspit yesterday. What a surprise, KCG clawed it's way out.

I know ZH isn't a market advisor and I trade only a miniscule amount but if you're looking to make a quick buck, follow my advice and stick your finger in the wind instead, it will be just as accurate.

I have only ever bought one stock in my less than 1 year of gambling. It's a miner and I still hold it and it's negative, surprise surprise!

Fri, 08/03/2012 - 19:25 | Link to Comment cyberfossil
cyberfossil's picture

You trade on the rumor, not on the news.  ZH broke the story the day before Knight crashed so people who traded on the ZH well based rumor could have made 800% on put options overnight.  The ZH story you saw yesterday was followup news.  You missed the boat again and ZH was not to blame for your selective reading.  Good luck on your miner, smiler.

Fri, 08/03/2012 - 20:08 | Link to Comment Papasmurf
Papasmurf's picture

KCG dug it's own pit and jumped in.  You think they've clawed their way out?  Lets see who owns the firm next week.

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