The Knight Capital trading fiasco, bad as it is, looms even worse because similar high-speed trading problems are likely to keep on roiling the markets and fueling investor mistrust.
Anger and gloom swept across trading floors Thursday, the day after the New York-based trading firm reported a software malfunction that caused a surge in volume at the market open Wednesday and violent price swings for nearly 150 stocks.
Few if any were cheering the misfortunes of Knight, whose very survival is challenged by the scandal. But the biggest concerns were for the retail investors who are likely to continue to flee the market. (HT- Now where have I heard that before???)
“You can only assume that these glitches are going to continue into the future,” says Todd Schoenberger, managing director of the BlackBay Group in New York. “This is a huge, huge negative. It’s another black eye for Wall Street. This is not good for the retail investor. How are they supposed to trust what we do?”