The Securities and Exchange Commission is investigating whether shortfalls in risk management led to the trading breakdown that cost the Knight Capital Group $440 million, Reuters reports. Regulators are trying to determine whether or not the software problem should have been caught.
On August 1, old software activated and caused Knight to make trades in about 150 stocks in about half an hour. At that point, no one person at Knight had been appointed to deal with such a problem, which slowed down the company’s response. Both Knight and NYSE Euronext had to act to end the outpour of errant trades.
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For more on Knight’s trading loss, see Trading Glitch Shows Flaws in Electronic Trading.