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Knight Capital in Talks to Sell Biggest Unit: Report

NEW YORK -- Trading firm Knight Capital Group Inc. (KCG) may sell its market-making business, which suffered a trading glitch in August that cost the company more than $460 million in the third-quarter losses, according to The Wall Street Journal.

The report said Knight Capital has spoken to at least two rivals that are interested in buying the market-making business and expects to receive proposals this week.

The Jersey City, N.J., company did not immediately respond to a request for comment from The Associated Press.

Knight takes stock trading orders from big brokers like TD Ameritrade (AMTD) and E-Trade (ETFC). It routes the orders to exchanges including the New York Stock Exchange. In 2011, the market-making business reported net earnings of $256 million in 2011 on $705 million in revenue. That was more than half of Knight's total revenue of $1.22 billion.

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On Aug. 1, Knight Capital sent numerous erroneous orders in 140 stocks listed in the New York Stock Exchange. Those orders were behind some sudden swings in stock prices and surging trading volume. The company said the problem triggered when it installed new trading software. The company's stock price plunged about 75% in two days.

Later Knight Capital took a $400 million infusion to avoid collapse, essentially selling control of the firm to a group of financial firms led by the Jefferies Group (JEF), as well as Blackstone (BX), a big private equity firm; the trading firm Getco; Stephens, Stifel Financial (SF) and TD Ameritrade.

In the third quarter, Knight Capital lost $764.3 million and said the software glitch cost it $461.1 million in financial losses. Knight also took a charge of $143 million to reflect its weaker brand and competitive position after the episode.

Knight Capital shares, which traded as high as $13.59 in January, closed Friday at $2.49. The stock hit a 52-week low of $2.24 on Nov. 15.
Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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