Knight Capital Americas LLC case study

I`m responsible for q 3

Case Study: Knight Capital Americas LLC

It took 19 years to build Knight Capital Americas LLC into the largest market maker on the New York Stock Exchange, but on August 1, 2012, it took only 45 minutes for the firm to be wiped out by an information technology (IT) problem: a change in the company’s software caused it to lose more than $450 million dollars in less than an hour. Although it was ultimately saved from bankruptcy when it was acquired two days later, the terms of acquisition were very unfavorable to the company’s shareholders.

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Each team will read the above, discuss, and address the following questions. The 4 teams scheduled to present will prepare to make a 15-minute presentation on March 13th. All teams will submit the presentation on Canvas before the class.

Questions:

  1. What happened at Knight Capital on August 1, 2012 at 9.30am? What went wrong?
  2. If we take a step back from the specifics, what would you say are the deeper causes of these events? How did this happen?
  3. Could it have been prevented by better management? What different procedures for change control, event response etc. should have been in place that were not?
  4. How culpable is CEO Joyce in all this? How about the board of directors? How can boards anticipate risks like this and forestall them? Or can they?
  5. What lessons does this story hold for how firms should be managed and governed? And what does it say about our ability to manage risk in large modern corporations operating in increasingly fast-moving and complex global markets?
 
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