Reuters:
Dormant software caused problem
* SEC asking if glitch should have been caught
By Jessica Toonkel and John McCrank
Aug 16 (Reuters) - U.S. regulators are working to figure out whether the trading snafu at Knight Capital Group that resulted in a $440 million loss and nearly destroyed the firm was exacerbated by a breakdown in risk management, according to a source familiar with the situation.
A team of U.S. Securities and Exchange Commission's trading and markets division staff and the Office of Compliance Inspections and Examinations are focused on trying to uncover what happened and whether the problem should have been caught, said the source, who declined to be identified because the individual is not allowed to talk to the press.
One of the questions being asked by the SEC is why there appeared to be a breakdown in controls. There was no single point person at Knight to deal with the problem when it occurred, leading to further confusion and extending the time it took to stop the flow, according to a second source.
A spokesman for the SEC declined to comment on the nature of the investigation, instead referencing an August 3 SEC statement on the matter that said there were rules in place that should have prevented the problem. [Read more]
posted by: gqjournal
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