Buyers eye Knight Capital as some customers return

Fri Aug 3, 2012 4:18pm EDT
 
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By Edward Krudy

(Reuters) - Struggling Knight Capital Group Inc's future remained in flux on Friday, with major clients saying they would resume trading with the company, while potential buyers were still combing through the company's books with an eye toward a deal.

Customers including TD Ameritrade and Scottrade, said they would return business to Knight, the nation's largest retail market maker of U.S. stocks. Still, the firm's trading volumes remained below usual levels on Friday.

At least one private equity firm had signed a non-disclosure agreement, a signal that it was looking at Knight's books for a potential acquisition or investment. Other private equity firms said they would be looking at Knight, which lost $440 million - most of its capital - after a software glitch flooded the stock market with errant trades on Wednesday.

There were unconfirmed reports that Knight had secured a credit line to keep it operating.

Knight's shares closed up 57 percent to $4.05 on Friday, still well below their $10.33 closing price on Tuesday, the day before the trading debacle occurred.

Several major customers, including retail brokerages TD Ameritrade and Scottrade, said they had resumed routing trades to Knight, which in 2011 was the largest U.S. retail market maker. "After considerable review and discussion, we are resuming our order routing relationship with Knight," TD Ameritrade said in a statement.

Other firms, however, including mutual fund giants Vanguard Group and Fidelity Investments, were still staying away from Knight, and the trading snafus have revived questions about the integrity of the equity markets.

"The apparent trading error by Knight Capital Group on Wednesday reflects the type of event that can raise concerns for investors about our nation's equity markets - markets that I believe are the most resilient, efficient and robust in the world," U.S. Securities and Exchange Commission Chairman Mary Schapiro said in a statement.   Continued...

 
A trader works at the Knight Capital kiosk on the floor of the New York Stock Exchange August 1, 2012. REUTERS/Brendan McDermid