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Knight Capital Case

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Knight Capital was founded in 1995 to trade retail order flow and became one of the world’s leading market makers with CEO Tom Joyce leading the company for 17 years. Knight has relied heavily on technology to accomplish its goals. In 2012 Knight Capital was the largest trader in US equites and processed more than 3.3 billion trades a day. (Fool.com, n.d.) The company on July 31st 2012 was worth approximately 1.4 billion dollars and then with one simple avoidable glitch everything changed.
On August 1, 2012 at approximately 9:30 a.m. Knight Capital systems had begun to process 212 orders from broker-dealers who had be pre-approved to participate in the New York Stock Exchange, Retail Liquidity Program. This program allows market makers like …show more content…

The first misstep was when Knights IT staff moved some of the code, but not all from the automated equity router and then deploying new code into the same router. This caused the router to not recognize the orders that had been filled. The second misstep according to the Securities and Exchange Commission was when a safeguard had sent 97 emails to personnel that identified the error and the router that was causing the error before trading for the day had even started but all 97 emails were ignored because an email was not considered a system alert. I think in this incident that Knight should have had multiple safeguards to stop something like this from happening. They could have easily hired an outside firm to double check the IT teams work after the initial testing of the new software and after the installation of the software on all of the servers. Also it took the 45 minutes to get control of the situation when the market opened. If the company had written procedures for this type of event to help guide the employees on what to do it could have resolved the situation a lot faster than it …show more content…

When the NASDAQ had technical problems with Facebooks initial public offering, CEO Thomas Joyce said “Obviously, they weren’t ready to go. They didn’t test it enough” (CNBC, 2014) I think that CEO Joyce should have followed his own words and had someone test the software on all of the servers after the testing phase was complete to ensure that there wouldn’t be any glitches on opening day. Instead once the software was tested and proved it would work it was loaded to the servers and never tested again. If there would have been procedures to double check the software after it was loaded to all of the servers, it’s likely that someone would have seen that they had a rouge server and would have been able to fix the problem before trading had even opened. Even one additional technician to verify all the work that had been accomplish should have been enough to stop this from

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