Knight Capital gets its trading job restored

Knight Capital, the trading firm responsible for the stock market disruptions on Aug. 1, 2012, obtained an emergency credit line, according to news reports. Knight said the losses, which were caused by a software glitch, will cost it $440 million. AP Photo/Richard Drew

(AP) NEW YORK -Knight Capital (KCG), the trading firm that fought for its survival over the weekend, is getting back its trading responsibilities.

The New York Stock Exchange said Tuesday it will restore Knight to its job as a "designated market maker" next week. The NYSE had temporarily suspended Knight from that role Monday as the trading firm narrowly avoided collapse.

A market maker ensures there is orderly trading of the stocks it's in charge of. That means it has to be ready to buy and sell those stocks at any time. Knight is in charge of 524 stocks listed on the NYSE, out of about 2,300 corporate issuers.

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Knight is still recovering after a technical foul-up in its systems flooded the market with erroneous orders last Wednesday. It's been a costly glitch. The company's stock has plunged and some clients have shied away. Knight was left with a $440 million loss after it covered trades that were mistakenly ordered by its computer systems.

On Monday morning Knight announced that it would get a $400 million cash infusion from a group of Wall Street firms. But that came with a heavy cost: The companies received shares that can be converted into a 73 percent stake in Knight, as well as three board seats.

Monday brought another indignity when the NYSE announced it was temporarily relieving Knight of its role as a designated market maker and giving the job to Getco, a rival firm and one of Knight's new owners. That's a rare move.

Larry Leibowitz, chief operating officer of the NYSE's parent company, on Tuesday praised both Knight and Getco for "teamwork and collaboration ... to ensure smooth, efficient and seamless transitions."

In a regulatory filing, Knight said the mistake caused "reduced order flow from our clients and potential loss of clients," but the company didn't give details. Knight also said some of the companies it borrows money from had reduced Knight's access to credit.

Knight's shares held steady Monday, falling 1 cent to $3.06. It's still down 70 percent from its $10.33 close last Tuesday, before the trading glitch occurred.

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