NYSE Euronext (NYX:US) temporarily assigned responsibility for 680 stocks that Knight Capital Group Inc. (KCG:US) handles as a primary market maker to Getco LLC so the broker could focus on shoring up its finances after incurring a $440 million trading loss on Aug. 1.
Automated trading firm Getco, which oversees activity in 896 companies listed on the New York Stock Exchange and NYSE MKT, will use its own technology and commit its capital to trade the shares, according to Larry Leibowitz, chief operating officer at NYSE Euronext. The Chicago-based firm will be responsible for an additional 524 stocks listed on the Big Board and 156 on NYSE MKT, formerly known as NYSE Amex, until oversight returns to Jersey City, New Jersey-based Knight.
“They needed short-term funding extensions,” Leibowitz said in a phone interview. “We needed a contingency plan in case that didn’t happen at any point in time. From late Wednesday on we’ve been discussing a contingency plan. We didn’t want to walk into Monday and have there be any doubts.”
Knight received a $400 million cash infusion through the sale of convertible securities after a software malfunction last week drove the market maker to the brink of bankruptcy. Getco, backed by General Atlantic LLC, Blackstone Group LP, brokerages Stifel Nicolaus & Co. and TD Ameritrade Holding Corp. (AMTD:US), as well as Stephens Inc. and Jefferies Group Inc. are investing, Knight said in a statement today.
Knight shares plunged 25 percent to $3.05 as of 10:11 a.m. in New York and are down 70 percent since July 31.
Knight’s mishap spurred calls in Congress to examine whether increasing automation is damaging the integrity of the U.S. equity market, the world’s largest with $16.4 trillion in share value.
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