Knight Capital Group Inc. KCG -0.74% hired International Business Machines Corp.IBM +0.56% to review the software problems that led to last month’s $440 million loss last month, and soon plans to name a new chief risk officer, the brokerage firm’s chief executive officer said Tuesday.
IBM began its review Aug. 27 and is examining the Jersey City, N.J.-based firm’s processes for developing products, after an “undetected bug” in old software caused it to unleash millions of unintended trades on Aug. 1, Knight CEO Thomas Joyce told analysts and investors at the Barclays Global Financial Services Conference.
“In effect, we kicked the beehive,” he said of troubles Knight has blamed on improperly installed software. “We began generating orders unrestricted by volume caps.”
As was previously reported by The Wall Street Journal, the trades caused Knight to amass stock positions valued at some $7 billion during the Aug. 1 trading day. The resulting losses forced Knight to seek rescue financing in order to open for business the next day. That weekend, Knight raised $400 million in equity financing from new investors to remain in operation.