Has Retail Investor Confidence Been Destroyed?
The “Knight of the living dead” yesterday in the dislocation at the open is just the latest saga n a broken market. We now know that (at least if nobody’s lying) Knight had a computer problem that led it to lose about $400 million.
Basically, instead of being a liquidity provider (that is, if you bid for a stock it’s on the other side provided it can make money) it reversed that role and started taking the other side at a loss.
The loss was large and immediate.
Then you have the Facebook IPO. And the flash crash. And the HFTs.
The problem is that there’s utterly no indication that anyone on the regulatory side will put a stop to it, and yet the entire perspective on this is not analytical accuracy but simply speed.”
Via Market Ticker