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Trading glitch causes company to lose $440 million

An erroneous trading position caused Knight Capital Group Inc. to lose $440 million in the stock market earlier this week, making it the most recent company encountering trouble due to glitches.
An erroneous trading position caused Knight Capital Group Inc. to lose $440 million in the stock market earlier this week, making it the most recent company encountering trouble due to glitches.

An erroneous trading position erased $440 million of Knight Capital Group Inc's capital yesterday in the stock market, and brought the company's shares to lose over half of its value, according to Reuters. Specifically, the shares fell below 53 percent, hitting a record-low of $3.24.

Knight, one of the largest firms that buys and sells stocks to provide liquidity to the markets, has already approached JPMorgan for emergency funding, as reported by Fox News, but it is not yet clear if that funding will come through.

This is not, however, the only trading glitch that has happened recently. Facebook's initial public offering encountered difficulties and then there was the 2010 "flash crash" where the Dow plunged nearly 1,000 points but recovered the losses within minutes.

Joe Anastasio, a founding partner of financial services consulting firm Capco that specializes in stock trading, said that the human control is beginning to get lost in the business.

"We've been so focused on automated throughput of orders and high-volume execution with no human intervention that we have lost the human logic factor when things go wrong," Anastasio said to the news source.

In addition, millions of orders build up overnight for automatic execution at the start of trading in the morning, Anastasio said, which creates a rush of bad trades from one single error.

While mistakes are bound to happen within any organization, either from human error or otherwise, it is important for companies to find an effective way to recover. Facebook, for example, is still a billion dollar business, even in the wake of its public trading problems.

Companies could further ensure their longevity by working with a business continuity consultant, as these professionals will be able to help create a plan of action to prepare for multiple types of disruptions.