By Brett Philbin and Liz Moyer
-- Firms continue to send orders elsewhere
-- Knight obtained line of credit and asked customers to send
trades their way
-- Cleaning up after trading glitch cost it $440 million
Financial services giants Vanguard Group Inc. and Fidelity
Investments are not routing customer orders to Knight Capital Group
(KCG), joining online brokers TD Ameritrade Holding Corp. (AMTD)
and E*Trade Financial Corp. on Friday even as Knight obtained a
line of credit and asked financial institutions to resume trading
with it.
A spokesman for Vanguard confirmed the firm isn't trading with
Knight. It also didn't send orders to the firm on Thursday, one day
after a trading glitch at Knight roiled markets and caused the firm
to lose $440 million.
As of June, Vanguard routed 26% of its customer orders in NYSE
Euronext-listed securities to Knight, according to a regulatory
filing.
Fidelity is also not routing customer orders to Knight on
Friday, according to a person familiar with the matter. It sent 33%
of orders to Knight as of the end of June.
Shares of Knight Capital climbed 24% to $3.20 Friday after the
Wall Street Journal, citing people familiar with the matter,
reported the firm received a line of credit that will allow it to
operate for the day.
Representatives of Knight have called trading-desk executives,
encouraging them to route orders to the firm as usual, these people
said.
Knight has been exploring ways to shore up its capital position,
including outside financing or potential deals, after the
technology glitch Wednesday raised questions about the reliability
of highly automated equity trading.
TD Ameritrade, along with several banks and brokerages, has been
sending customer orders elsewhere since Knight's trading breakdown.
A TD Ameritrade spokeswoman said the Omaha, Neb., online brokerage
is testing systems to ensure the routing process runs properly and
is "evaluating the situation."
An E*Trade spokesman confirmed the brokerage is not routing
orders to Knight on Friday.
TD Ameritrade routed approximately 4% of its total customer
orders to Knight Capital as of June 30, while E*Trade sent 14% of
its NYSE-listed trades through Knight, according to regulatory
filings.
Write to Brett Philbin at brett.philbin@dowjones.com
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