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Knight's costly trading glitch: $440 million

August 2, 2012: 10:13 AM ET

Knight Capital Group (KCG) said Thursday that it will face a $440 million loss for causing a glitch that affected trading activity in nearly 150 NYSE-listed stocks.

Knight said in a statement that it has closed out of all its positions related to the erroneous orders and removed the software that caused the problems from it systems.

Shares of Knight, which fell 33% Wednesday, plunged as much as 54% in early trading Thursday.

Click chart for more Knight stock data.

Knight was already facing $30 million to $35 million of losses related to Nasdaq's (NDAQ) trading glitches on the day of Facebook's (FB) public debut.

With these massive losses on its books, Knight said it is now actively seeking ways to raise more capital. The company didn't specify whether it might also be looking for a buyer. With Knight's stock cratering, it seems like almost any available option will be on the table.

Knight CEO Tom Joyce told Bloomberg Television Thursday that the firm is moving quickly to mitigate the fallout. "We have all hands on deck and we understand what the issues are," he said.

Related: Knight's bizarre trades rattle markets

Joyce said that the trading glitches stemmed from a software program Knight had put in place Tuesday evening. It's not clear how much testing had been done but Knight's CEO acknowledged to Bloomberg that new software had a "fairly major bug in it."

"The code has been restored [and] we're very confident in the current operating environment that we reestablished," Joyce told Bloomberg.

A big question is whether brokers who can trade elsewhere will still be willing to route orders through Knight's systems. The company also tried to quell concerns over whether it had enough capital to make markets in trades, saying in a statement that Knight and its subsidiaries were "in full compliance" with capital requirements.

The trading problems have forced Knight's CEO into an awkward position. Joyce was omnipresent on television, Capitol Hill and at industry conferences publicly rebuking Nasdaq and its CEO, Robert Greifeld, for how the exchange handled Facebook's botched IPO.

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Maureen Farrell
Maureen Farrell
Staff writer, CNNMoney

Maureen Farrell is a staff writer at CNNMoney and covers Wall Street, banking, mergers and the stock and bond markets. Prior to joining CNNMoney, she covered venture capital and entrepreneurs for Forbes, and mergers and bankruptcy for Mergermarket and Debtwire, both divisions of the Financial Times.

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