I was putting together a general criticism addressing comments made about Knight when I happened to spot this:
The large trading losses suffered by Knight Capital Group (KCG) since Wednesday's software glitch may ultimately lead to a structural change in the equity market-making business, but Fitch Ratings believes exposure to KCG, among large rated counterparties, is moderate and manageable... It does not appear that any prime brokers had disproportionately high exposure to KCG. As a result, even in a bankruptcy scenario, we do not expect any major rated institutions to suffer large losses linked to KCG's difficulties. Still, the events of the last two days again pose risks for equity trading volume as many investors become more concerned about seemingly unforeseeable risks related to trading technology problems and the broader market impact of high-frequency trading systems that periodically break down. Over time, we believe these events may contribute to a re-assessment of counterparty risk by major trading institutions, with trades more likely going to larger, better capitalized firms.
Still, the events of the last two days again pose risks for equity trading volume as many investors become more concerned about seemingly unforeseeable risks related to trading technology problems
pose risks for volume? Incoherent.
trading technology problems pose risks? Trading technology doesn't determine the pricing of value. The value does. A formal exchange isn't needed for that recognition.
and the broader market impact of high-frequency trading systems that periodically break down.
No, they don't.
Over time, we believe these events may contribute to a re-assessment of counterparty risk by major trading institutions, with trades more likely going to larger, better capitalized firms.
A contradiction since concentration creates counter party risk.
Fitch has turned into a second rate operation. Before 2005 it never was all that good, but at least they tried to represent integrity. No longer. Plus, they're just not very good at what they try to do. |
