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Knight Capital confirms rescue deal in filing

This news story was published on August 6, 2012.
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By Andrew Tangel, Los Angeles Times –

NEW YORK — Knight Capital Group Inc. on Monday confirmed it has entered into a $400 million deal to rescue the struggling brokerage after a trading software glitch last week left it on the verge of collapse.

In a filing with the U.S. Securities and Exchange Commission, Knight said a group of investors agreed to purchase $400 million of 2 percent convertible preferred stock.

The preferred stock would be convertible into 267 million shares, diluting current shareholders. Knight’s stock tumbled after the opening bell on Wall Street.

Knight said it expected the deal to be completed Monday morning.

The New York Stock Exchange separately announced it would reassign Knight’s market-making duties to Getco, another market maker.

The exchange said in a statement the reassignment was temporary. Knight would regain its market-making abilities following “completion and approval of a recapitalization plan.”

“We believe this interim transition is in the best interests of investors, our listed issuers, market stability and efficiency, as well as Knight, as the firm finalizes its equity financing transaction,” said Larry Leibowitz, chief operating officer of NYSE Euronext, which operates the exchange.

“Our first priority is to ensure market integrity and an orderly trading environment in which investors and all market participants have confidence,” Leibowitz said in a statement.

Knight lost $440 million last week when a trading software glitch sent a slew of errant trades into the stock market. The loss forced the major Wall Street brokerage to seek rescue financing or find a buyer.

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