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Case Study: Knight Capital Americas LLC

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 unfavourable to the company’s shareholders.

The above case study is available with your Harvard coursepack

Each team will read the above, discuss, and address the following questions based on which they will make a 15-minute presentation on March 21st. Presentation to be submitted on Canvas before the class.

Questions:

  1. 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?
  2. 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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