August 9, 2012 / 3:23 PM / 6 years ago

Knight losses estimated at $270 million after taxes: CEO letter

A Knight Capital logo is seen on a trader's jacket on the floor of the New York Stock Exchange August 1, 2012. REUTERS/Brendan McDermid

(Reuters) - Trading losses at Knight Capital Group Inc were about $270 million after taxes from the August 1 software glitch that sent the firm scrambling for a financial lifeline, Chief Executive Tom Joyce told clients in a letter.

The brokerage has suffered from a decline in customer confidence following last week’s debacle, which resulted in the trading losses and a $400 million weekend deal for a consortium of financial firms to take a more than 70 percent stake in the firm for a heavily discounted $1.50 a share.

“We are grateful for the support of the industry, and sincerely appreciate our clients’ loyalty in standing by us during this period,” Joyce said in the letter, dated Tuesday. A copy of the letter was obtained by Reuters.

The post-tax losses compare with previously disclosed pre-tax losses of $440 million.

Joyce said in the letter that the firm is reviewing what went wrong that morning with outside advisers, and conducting its own internal review. He wrote that the trading software that caused the 45 minutes of chaos and steep losses has been removed from the company’s systems.

“We have taken measures to enhance our processes designed to prevent another similar situation from arising,” he wrote.

Knight, based in Jersey City, New Jersey, remains in good standing with the Depository Trust & Clearing Corp and the Options Clearing Corp, Joyce wrote, while its broker-dealer subsidiaries, Knight Capital Americas LLC and Knight Capital Europe Limited, have maintained capital levels above the minimum required and consistent with historical levels.

Reporting By Ashley Lau in New York; editing by John Wallace

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