The NYSE’s RLP (retail liquidity program) started yesterday morning.  According to this Bloomberg article from July 18th, Knight Trading was very eager to participate in this program, and defend their position in the marketplace.

Joyce’s comments about the NYSE RLP from July 18th:

NYSE’s effort is an “instrument crafted by our friends at 11 Wall Street in an attempt to garner more retail market share,” Thomas M. Joyce, chairman and CEO of Knight, said today on a conference call. “Let the games begin.”

While competition may hurt Knight by shrinking the volume of retail orders it gets, the company’s market-making business at NYSE would offset part of the loss, he said. Knight can “defend our place in the market quite ably,” he added.

It appears that Knight was so eager to defend their place in the market that they rushed trading software into use, without properly working out the kinks.  Algorithmic trading software can be very dangerous and if it is rushed in without proper testing, very bad things can happen as we saw yesterday morning.

The biggest question that still remains is, why was this rogue algorithm allowed to run for 29 minutes straight?  Was Knight in such a hurry to get this software operational, that it forgot to put a kill switch on it?  That is a very scary thought.