$12 Million Fine for Market Fiasco

WASHINGTON (CN) – Knight Capital Americas will pay $12 million to settle charges stemming from an Aug. 1, 2012 computer fiasco that disrupted the New York Stock Exchange and cost Knight $460 million, the SEC said today.
     Two coding errors caused Knight’s computers to send more than 4 million orders to the market, though Knight was trying to fill just 212 customer orders, the SEC said in a statement announcing the settlement.
     “Knight Capital traded more than 397 million shares, acquired several billion dollars in unwanted positions, and eventually suffered a loss of more than $460 million,” the SEC said in the statement.
     According to the SEC’s cease and desist order: “By the time that Knight stopped sending the orders, Knight had assumed a net long position in 80 stocks of approximately $3.5 billion and a net short position in 74 stocks of approximately $3.15 billion. Ultimately, Knight lost over $460 million from these unwanted positions. The subject of these proceedings is Knight’s violation of a Commission rule that requires brokers or dealers to have controls and procedures in place reasonably designed to limit the risks associated with their access to the markets, including the risks associated with automated systems and the possibility of these types of errors.”
     It’s the SEC’s first enforcement action under the market access rule, Rule 15c3-5, which was adopted in 2010.

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