The Knight Capital Group Inc. trading firm said it lost$764.3 million in the third quarter because of a software glitch that floodedthe stock market with trades one day in August, causing dozens of stocks tofluctuate wildly.
Knight said Wednesday that the software glitch cost it$461.1 million in financial losses. The company also took a charge of $143million to reflect its weaker brand and competitive position after the episode.
The problems began for Knight early on Aug. 1, when dozensof stocks started rising and falling sharply for no apparent reason. WizzardSoftware, for example, shot up above $14 after closing the night before at$3.50.
Knight takes stock trading orders from big brokers like TDAmeritrade and E-Trade. It routes the orders to exchanges including the NewYork Stock Exchange.
After Knight acknowledged that a technical glitch in itssoftware had caused the disruption, its stock lost three-fourths of its valuein two days. Knight had to cede control of its operations on the New York StockExchange and obtain a financial rescue from Wall Street peers.
Knight, based in Jersey City, New Jersey, managed to ekeout a small profit after excluding losses from the trading fiasco. Its stockrose 5 percent in premarket trading.
Knight's loss amounts to $6.30 per share for the periodended Sept. 30. That compares with net income of $26.9 million, or 29 cents pershare, a year ago.
The technology issue accounted for a financial loss of$2.46 per share, plus 76 cents per share for the related impairment charge.
Excluding those and other one-time items, Knight said itearned a penny per share. Analysts had forecast 2 cents per share, according toa FactSet survey.
Chairman and CEO Tom Joyce said that the company wasgratified that it managed a small profit on an adjusted basis.
"I believe the recovery to date speaks to the strengthof our offering, the dedication of Knight's client teams and deep clientrelationships we enjoy," he said.
Net trading revenue was negative because of the softwareglitch. Knight Capital's market making segment was hit the hardest, reportingnet negative revenues of $341.2 million.
After the trading losses threatened its survival, Knightreceived $400 million from an investor group that included Jefferies Group,Blackstone, Getco, Stephens, Stifel Nicolaus and TD Ameritrade. The investorsreceived stock that can be converted into a 73 percent stake in Knight, whichmeans Knight essentially handed over control to the investor group.
Knight also added three directors to its board, increasingits size to 10 members.
Knight's stock rose 6 cents to close at $2.64 Wednesday.Its shares fell to a 52-week low of $2.27 in August. They traded as high as $14per share almost a year ago.