Oops i implied all of the securities that day and not just the 6.

erm Knight reported a 440mm USD loss. THey know it, they said it.

They took all 4mm trades they did on those securities, realized the loss and pinpointed it at 440mm, they know that because NYSE said that only 6 stocks where the trades executed at 30 percent higher or lower than opening price will be cancelled.

Reuters reported nothing wrong, and I have stated nothing contrary to that.

Knight is on the hook for the full 440mm USD loss.

In your case, the small investor gets back 0.

In current market scenario, the small investor still has the ability to sell and recover a small portion of his investment.

I think the small investor feels the pain more when he gets back 0 compared with a big firm.

Really?

What if you were an IT guy who worked at Enron and you happen to be paid in Enron stock?

What if you were working at face book and they paid you in facebook stock for a lower salary and it turns out Facebook was basically committing fraud by having bots click on their paid adverts links. Facebook stock then crashes and you can't sell out of what you have.

Perhaps you hide all your money under your mattress, good luck keeping up with inflation.

This is also where Knight's algorithm potentially screwed up.

usually firms will put in limit orders. ie I believe it's this so therefore don't go above or below that target to transact

Also what you are missing is that NYSE just "matches" trades. 1 second "guessing" ignores that fact that no matter what you guess, if there is no match, there is no trade. And since not all the market makers enter their prices at the same time, not everyone waits around at the same time.

here's an exaggerated example
Take enron when they released their financial misreporting scandal.
Imagine if every one had to wait 1 hour before prices get updated and transacted.
The stock was at 72$
Everyone in the world just puts in a short @ 72$ because we ALL know what's goign to happen to this stock
At the end of the hour, every one and their extended relatives has shorted Enron @ 72$.
Now, as the exchange, what gets executed? Chances are, nothing. All those buyers on the other side already knew that 72$ is a terrible buy and would have all pulled prices. You now have 0 liquidity.

These are actually dark pools and nothing at all related to how you and me trade.

These are transactions that go between market makers. Big boys on the street.

You create an external market place by allowing the free flow of securities behind the scenes. You don't actually have the ability to see what's going on in the background. What it insures is that when the retail market looks at it, they can be sure that they are transacting on the "real" price as determined by the market.

So to your interval question, it's about the price.
If you transact only once a month, surely the price has moved somewhere in between. You buy apple at 600 at the beginning of the month and you want to sell it now, what price do you get quoted? The 600 that was still there a month ago, or do you wait till the end of the month and see where it lands.

Actually, NYSE did tell them exactly that.

Knight is on the hook for the full 440mm USD loss. NYSE stuck them with every single trade that they transacted during the particular time span.

And before you spew the bailouts/ do-overs/hard working american rhetoric, let's actually review the facts related to the topic on hand.

-Knight is a market maker. Their sole purpose on NYSE to ensure liquidity and make money. They do it by actively stepping in to sell and buy particular securities. There is nothing there that "games" the system.
-They rolled out a new application mid week and apparently turned it on without fully testing it causing a huge spike in volume
-The algorithm, rather stupidly, bought high and sold low.
-NYSE actually called within 30 minutes Knight to inform them that they might be accidentally executing incorrectly
-Knight basically ignored the warning and let the algorithm run for a full hour.
-End of the day, Knight is on hook for the entire loss. Not because it was a "mistake" but because these are all legitimate trades with legitimate counterparties and didn't violate any rules.
-Nyse has stated that and has said there would be no further appeals allowed on the issue.