The company blamed the glitch and the resulting flash-crash in the wider market on faulty software, and a group of investors – which included TD Ameritrade and Blackstone – eventually reached a $400 million deal to bail out the equities broker and market maker in return for an ownership stake of about 70%. Other investors included, Getco, Stifel and Nicolaus & Co.
Prior to the bail out, market rumours suggested Knight Capital might seek to sell its Hotspot FX business – which it acquired for $77 million in 2006 – in an effort to shore up its capital base.
In August, Hotspot FX average daily volumes (ADVs) fell to $21 billion compared with July, when the platform saw ADVs at $25.9 billion.
And while the rest of the FX multi-dealer platform market saw volumes decline last month, none experienced a drop as steep as Hotspot FX’s figures.
| FX volume trends compared to their competitors |
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| Source: Hotspot FX, CME Group, EBS/Icap, Thomson Reuters, FXall |
EBS/Icap August FX volumes were down 10% last month compared with July, Thomson Reuters recorded a 12% drop month-on-month, FXall were down by 7% from July and CME FX volumes were down by 9%.
Year-on-year, Hotspot FX’s ADVs declined 33.5% after the platform saw August 2011 ADVs of $31.1 billion.