Knight Capital Shuts Down Trading on Electrical Outage

NEW YORK (TheStreet) -- Knight Capital (KCG), the financial services firm that triggered a trading glitch in August that cost it some $440 million, shut down trading Wednesday because of an electrical outage.

The news comes after a two-day closure of major U.S. stock markets due to Hurricane Sandy's drubbing of the East Coast.

Knight told clients in a memo that it was experiencing "power issues" and asked them to trade equities elsewhere, according to Bloomberg News.

"Due to a building emergency [power issues] ... [all]computer interfaces with Knight will be shut down with no new orders, both by phone or electronic, being accepted at this time," the memo said, which Bloomberg confirmed with a company spokeswoman.

A worry before Hurricane Sandy hit was for an electrical malfunction to occur at the New York Stock Exchange or Nasdaq.

"The SEC gets bashed a lot, but it made the right decision to coordinate the market closures," Robert Battalio, a finance professor at University of Notre Dame, wrote in an email about the two-day closure. "Closing the exchange means there were a lot of bad trades that didn't happen. ... Computers can't be programmed for every contingency; there is still a need for people to 'babysit' trading."

Shares of Knight were shedding 3.6% after the news broke on Wednesday.

-- Written by Joe Deaux in New York.

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