• Steve H. Hanke
    05/04/2016 - 08:00
    Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke. A few weeks ago, the Monetary Authority of Singapore (MAS) sprang a surprise. It announced that a...

Will Penson Cash Vaporize Gentle Into That Good Knight?

Tyler Durden's picture




 

First MFG; then PFG; and next KCG? A little over two months ago Knight Capital, the well-respected brokerage house, purchased a 'floundering' futures brokerage - Penson Financial Services. The de minimus $5mm that Knight paid on May 31st for the firms meant (implicitly) that the $411mm of customer funds became 'useful'. With various firms pulling lines and the math underlying Egan-Jones downgrade, it is natural that an investor would be anxious to ensure that all their hard-earned deposited segregated accounts are, well, still segregated. Have no fear though, as Bloomberg reports, CME, which regulates Knight's futures business, is "monitoring the situation". An advocacy lawyer for MFG/PFG clients noted: "Those at Penson should be a little worried;" and so while KCG "actively pursues its strategic financing alternatives to strengthen its capital base" - read D.I.P. plans - one can't help but wonder whether all that shiny customer cashola is burning a hole in their capital-deficient pockets. It would seem at $2.27 per share, a few others are wondering that also.


P.S. While the rogue algo that took Knight down to Chinatown may have been switched off, it appears its ever-ready competitors forgot to turn theirs off - as NANEX provides (once again) clear evidence of the wondrous market-making/eating algos feasting on the carcas of freshly damaged capital to the tune of 1000s of trades per millisecond occurring...

 

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Thu, 08/02/2012 - 15:24 | 2673518 bdc63
bdc63's picture

Knight Fever

Thu, 08/02/2012 - 15:28 | 2673539 vmromk
vmromk's picture

I can't think of a COCKSUCKER more trustworthy to whom I would entrust my money than to the "Honorable" Jon Corzine.

Hey Jon, your orange jumpsuit and prison cell are all ready.

Thu, 08/02/2012 - 15:31 | 2673550 malikai
malikai's picture

http://www.zerohedge.com/news/knight-ceo-comments-algo-failure-which-has...

LOL.

EDIT: Sorry Mr. Pendergraft. It's probably over now. Good Job!

Thu, 08/02/2012 - 15:35 | 2673577 AldousHuxley
AldousHuxley's picture

Employees say

Senior developers, as they leave the firm, are replaced by very junior ones and as a result many systems are built by inexperienced people and are now a support nightmare.

Thu, 08/02/2012 - 15:38 | 2673589 Pladizow
Pladizow's picture

"monitering the situation", aka Stealing!

Dont worry, your funds have been segregated - from you!

Thu, 08/02/2012 - 15:44 | 2673624 DoChenRollingBearing
DoChenRollingBearing's picture

It will take, what, another day or two before we see if Knight is yet another pack of thieves like their brethren at MF Global and PFBest.  Does JPM have any of Knight's money, hmm...?

Thu, 08/02/2012 - 15:48 | 2673657 RockyRacoon
RockyRacoon's picture

Hey!  I'm enjoying the blog posts.  You're doing a good job.

On this Knight thingy...  They'll never let it be known who the individual people are who are responsible.   Letting the public see the pimply-faced high school grads who are at the switch wouldn't instill much confidence in the markets.  And confidence is just about all the markets run on these days... and that's getting pretty thin.

Thu, 08/02/2012 - 15:57 | 2673686 ZerOhead
ZerOhead's picture

That's confidence Rocky.

Not much of it at Knightmare Kapital Korp. these days...

Thu, 08/02/2012 - 16:07 | 2673739 Buckaroo Banzai
Buckaroo Banzai's picture

Based on the old, "One time is random, two times is a coincidence, three times is a conspiracy" rule, does anybody else get the feeling that the Futures industry is being deliberately targeted for destruction?

That would be interesting given that the futures market is critically important to the operation of the agriculture industry.

And you know what Kissinger said about controlling the food supply...

Thu, 08/02/2012 - 17:12 | 2674035 mt paul
mt paul's picture

when tomorrows 

are doubtful....

the futures markets

are irrelevent...

Thu, 08/02/2012 - 19:11 | 2674313 Henry Hub
Henry Hub's picture

The software development of these trading platforms was probably outsourced to India long ago. You get what you pay for.

Thu, 08/02/2012 - 17:09 | 2674026 Papasmurf
Papasmurf's picture

Does a black bear shit in the woods?

Thu, 08/02/2012 - 17:14 | 2674039 mt paul
mt paul's picture

don't know about

my black bear breathern

but i poop

where ever i want ..

Thu, 08/02/2012 - 22:27 | 2674712 Buck Johnson
Buck Johnson's picture

Your exactly right, they didn't go to "investigate" until today.  I think the money is gone, and here's why.  Ask yourself why would Knight buy a struggling brokerage that was on it's last leg for 5 million (pennies on the dollar)?  It wanted that 411 million in customer money in the segregated accounts.  I've always said that MF global wasn't the only one that was doing what it did and it turned out PF was one and it will turn out Knight is one also.  It doesn't make sense for that "program glitch" to have the company lose 70% or more of it's value in  less than 36 hours and continue to lose overnight.  It's bedcause people who know how the game is played on Wallstreet know that Knight had to have used that client money and with them having a new market cap of less than 200 million they can't get a loan to put the money back if they wanted too.

Remember why would Knight pay 5 million dollars for a struggling brokerage?

Thu, 08/02/2012 - 15:44 | 2673630 NotApplicable
NotApplicable's picture

It seems that lately this song is stuck in my head more and more.

Uriah Heep - Stealin

http://www.youtube.com/watch?v=g3VCfCsX5Yo

Maybe we can turn it into Corzine's theme song?

Thu, 08/02/2012 - 17:58 | 2674144 Arnold Ziffel
Arnold Ziffel's picture

<<"monitering the situation">>

 

paper shredding and erasing hard drives as fast as possible....

Thu, 08/02/2012 - 23:38 | 2674821 FreedomGuy
FreedomGuy's picture

Corzine will be called in to monitor. Geithner will check their tax returns. Holder will decide if prosecution is needed.

No problems. We are all in good hands.

Thu, 08/02/2012 - 15:38 | 2673597 malikai
malikai's picture

"Cost Savings by Rotation"

I saw so much of that. But they all do it. And they all fail, not always because of broken systems. Normally because it's the broken culture that causes the broken systems, and also, broken risk management, broken fiduciary duty, broken management, etc.

Thu, 08/02/2012 - 16:21 | 2673818 lemonobrien
lemonobrien's picture

they replaced the americans with H1-Bs this is what you get.

Thu, 08/02/2012 - 15:31 | 2673557 AldousHuxley
AldousHuxley's picture

Knight Rider

 

give money to KITT. the car has mobile high frequency trading module built in.

 

 

Thu, 08/02/2012 - 16:01 | 2673699 AcidRastaHead
AcidRastaHead's picture

I'm afraid I can't do that Michael. 

Thu, 08/02/2012 - 15:41 | 2673616 insanelysane
insanelysane's picture

Recycle the "things were really hectic around here during the last few days" excuse.

Thu, 08/02/2012 - 16:14 | 2673771 dracos_ghost
dracos_ghost's picture

Black Knight instead of Black Swan.

Scadoosh.

Thu, 08/02/2012 - 16:30 | 2673888 yrad
yrad's picture

Looks like they are going after any company that ends in "G"

OM"G"

Thu, 08/02/2012 - 15:25 | 2673520 Neethgie
Neethgie's picture

Knight's last throw of the dice is furiously defending fb in the 19's

Thu, 08/02/2012 - 15:46 | 2673598 bdc63
bdc63's picture

Ya think? ... I think they are selling their FB shares as fast as human-bot-ly possible

Thu, 08/02/2012 - 15:26 | 2673521 Debtonation
Debtonation's picture

Sell at the market price

Thu, 08/02/2012 - 15:27 | 2673530 Jlmadyson
Jlmadyson's picture

They ain't monitoring shit.

Vaporized!

Thu, 08/02/2012 - 16:01 | 2673697 Gene Parmesan
Gene Parmesan's picture

If you can't hold it in your hand or stand in front of it and defend it you don't own it.

Thu, 08/02/2012 - 15:27 | 2673531 pashley1411
pashley1411's picture

Haven't we learned that "segregated accounts" is, hmm, segregated until accounting moves the money elsewhere?

Thu, 08/02/2012 - 15:29 | 2673545 Josh Randall
Josh Randall's picture

Jim Crow is dead - there ain't no segregation no more

Thu, 08/02/2012 - 16:08 | 2673742 alien-IQ
alien-IQ's picture

well played. nice.

Thu, 08/02/2012 - 15:34 | 2673574 Unprepared
Unprepared's picture

Accounting doesn't "move" anything. Just playing around with settlements that have no net accounting impact. See? All legit.

Thu, 08/02/2012 - 15:46 | 2673646 alien-IQ
alien-IQ's picture

It's hard to segregate vapor...unless you have a vaporizer (which are fabulous by the way).

Thu, 08/02/2012 - 15:27 | 2673532 PontifexMaximus
PontifexMaximus's picture

Who is in charge, Mary Schapiro or my Superfriend Gary Gensler?

Thu, 08/02/2012 - 15:27 | 2673533 Vincent Vega
Vincent Vega's picture

would I yes to say yes.....

Fri, 08/03/2012 - 08:47 | 2675325 StychoKiller
StychoKiller's picture

"Would I say no to yesterday, or yes to knowing at all?"

Thu, 08/02/2012 - 15:28 | 2673536 slaughterer
slaughterer's picture

We bought 100,000 shares of KCG at $2.30.

Thu, 08/02/2012 - 15:32 | 2673563 walküre
walküre's picture

are you holding after 10% + gains or selling?

Thu, 08/02/2012 - 15:35 | 2673578 LoneStarHog
LoneStarHog's picture

Yeah! Sure you did...

Thu, 08/02/2012 - 15:38 | 2673600 cifo
cifo's picture

Why?

Thu, 08/02/2012 - 15:44 | 2673633 alien-IQ
alien-IQ's picture

You show us the trade ticket.

We won't call you a bullshitter.

Thu, 08/02/2012 - 16:02 | 2673707 CvlDobd
CvlDobd's picture

@slaghterer. Didn't you say yesterday the loss on this was capped at $150 million? Forgive me if I confused you with some one else.

Thu, 08/02/2012 - 16:06 | 2673732 alien-IQ
alien-IQ's picture

It's now at $1.85 on heavy selling volume in AH...but let me guess..you already sold for a nice profit...right?

You and robo should date.

Thu, 08/02/2012 - 16:27 | 2673856 The Axe
The Axe's picture

ha ha    flame so more   I can take it.....bot 300 sept 4 calls  sold 300 sept 5 calls for .20cents   I will watch it burn..cause I feel the company will survive....  

Thu, 08/02/2012 - 15:28 | 2673538 The Axe
The Axe's picture

Tyler    ZH said the same thing about Jefferies.......i bot that dip   long 30,000     betting tonight Wall Street and Nite Partners  save the day....

Thu, 08/02/2012 - 15:40 | 2673611 alien-IQ
alien-IQ's picture

Too bad you didn't go long MONsanto during the Vietnam War. I hear they made a killing (literally) on Agent Orange.

And now they "make" our food. Ain't that comforting?

Thu, 08/02/2012 - 16:18 | 2673796 CloseToTheEdge
CloseToTheEdge's picture

with 2 decades of enough BSTpus in the milk to make your dick fall off

(he won't need an axe)

Thu, 08/02/2012 - 15:44 | 2673631 Dr. Engali
Dr. Engali's picture

If I remember correctly it was Tyler's attention to Jefferies book that forced them to take action. But if you want to take a chance on a penny stock after two firms just vaporized, by all means go for it. Bet the ranch.

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