KNIGHT Capital said yesterday that a group of investors has rescued the firm in a $400m (£256.2m) deal that keeps the embattled leader in US equities market-making in business, but comes at a huge cost to existing shareholders.
Chief executive Tom “TJ” Joyce said the new investors supported him and his management team, but it was too early to tell whether the firm keep the same strategy it had before last week’s losses. But there were immediate signs the rescue helped market confidence, as two large brokerages resumed routing orders through the company and data showed volumes picking up.
Blackstone Group, rival market maker Getco plus TD Ameritrade Holding, Stifel Nicolaus, Jefferies Group and Stephens purchased preferred shares for what works out to be a 73 per cent stake in the company, Knight said.
The New York Stock Exchange said it would transfer Knight’s market-making responsibilities on more than 500 stocks – and related Knight employees – to Getco, until the recapitalisation is complete.
Knight’s problems started last week, when a software glitch flooded the NYSE with unintended orders for stocks, sending some shares up more than 100 per cent and leaving Knight with the loss.
City A.M. Reporter