Security Experts:

Software Glitch Cost Trading Firm $440 Million

Knight Capital Group says that a technical glitch within newly installed trading software caused a bit of a problem on Wednesday, causing some stocks to swing more than 10% in early trading. The snafu cost Knight hundreds of millions of dollars.

According to a statement from Knight Capital, the software glitch resulted in Knight sending numerous erroneous orders in NYSE-listed securities into the market. The mistake was costly, to the tune of nearly $10 million dollars per minute.

“Knight has traded out of its entire erroneous trade position, which has resulted in a realized pre-tax loss of approximately $440 million. Although the company's capital base has been severely impacted, the company's broker/dealer subsidiaries are in full compliance with their net capital requirements,” they said in an SEC filing.

Wall Street reports that Knight’s shares plummeted 63% on Thursday, after falling 33% the day before. The closed at $2.58 a share, and there is speculation that the company many not recover, and that it would could possibly file for bankrupcy or be forced to sell itself. The incident is being treated as a lesson for risk controls in the stock market, but for IT shops it should prove the value of testing before deployment.

In the aftermath, the glitch-riddled software was removed, and Knight said that none of their clients were negatively impacted.

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Steve Ragan is a security reporter and contributor for SecurityWeek. Prior to joining the journalism world in 2005, he spent 15 years as a freelance IT contractor focused on endpoint security and security training.