Following trading glitch, high frequency traders took their business elsewhere fast.
FORTUNE - Could Knight Capital's $440 million trading glitch be making the market a little bit fairer?
In August, the volume of trades executed by Knight Match, a system favored by high frequency traders, plunged 44% from the month before. The drop followed a programing glitch that caused Knight's computers to execute millions of faulty buy and sell orders. The glitch ended up costing Knight Capital Group (KCG) $440 million and nearly sent the firm into bankruptcy.
Knight was saved by a hastily assembled $400 million from a consortium of investors, but it appears the damage to Knight's reputation with customers, particularly high frequency traders, will take longer to repair. Knight says the volume numbers, which were compiled by stock market and technology research firm Tabb Group, exclude the trading glitch, which happened on August 1st. Knight was forced to shut down its systems for part of that day. The volume drop shows that traders shied away from Knight longer than just in the days following the trading glitch. A Knight spokeswoman says the company won't comment on whether trading volumes rebounded in September until early next month.
MORE: Why Knight lost $440 million in 45 minutes
Stock trading was relatively slow in August in general, especially compared to a year ago, when a credit downgrade of U.S. Treasury bonds by Standard & Poors caused the market to drop. Overall, stock trading was down just under 10% in August compared to July. Still, it seems, Knight's trading glitch and others like it have knocked some of the momentum out of high frequency trading, which has become a larger, and more controversial, part of the market in the past few years. By comparison, the New York Stock Exchange recently said a system that was launched in August to draw orders away from trading venues used by high frequency traders is gaining in volume.
By some estimates high frequency traders make up two-thirds of all stock market trading. Last week, the Senate held a hearing on high frequency trading. One of the issues discussed was whether exchanges and trading venues like Knight give
http://finance.fortune.cnn.com/2012/09/25/knight-dark-pool-loses/?iid=HP_LN
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