Forty-five minutes. That's how long it took Knight Capital to lose $440 million on Wednesday when its new trading software went haywire, making millions of unintended trades, and leaving it at the brink of collapse. Now the company is fighting for its survival, and debate is heating up about whether new regulation is needed to bring a complicated market to heel. "The structure just may be too complicated to work," one consultant tells Reuters.
That $440 million loss represents roughly four times Knight's annual net earnings, according to Reuters, leaving it scrambling to find cash or a buyer. The company's stock price has plunged around 80%. Knight is one of the leading market makers responsible for keeping transactions flowing smoothly on Wall Street. Some SEC officials are now calling for new regulations, protective mechanisms, and testing requirements for trading software, the New York Times reports, and they're getting less pushback than usual. Recent events "have scared the hell out of investors," one former SEC chairman said.