August 03, 2012 BREAKING NEWS FROM CNBC’S KATE KELLY: GOLDMAN SACHS CHARGED KNIGHT $440M FOR UNWIND WHEN: TODAY, FRIDAY, AUGUST 3, 2012 WHERE: CNBC’S “POWER LUNCH” Following is the unofficial transcript of breaking news from CNBC’s Kate Kelly. All references must be sourced to CNBC.
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KATE KELLY: WELCOME BACK TO POWER LUNCH I’M KATE KELLY AT HEADQUARTERS WITH SOME BREAKING NEWS ON KNIGHT TRADING GROUP. KNIGHT TRADING GROUP, AS YOU KNOW, ENTERED INTO THESE ERRONEOUS TRADES ON WEDNESDAY AND WHEN THEY UNWOUND THEM AFTER THE BELL THAT NIGHT, THEY DID SO WITH GOLDMAN SACHS. GOLDMAN SACHS TOOK THE OTHER SIDE OF THAT TRADE. ESSENTIALLY, HELPING KNIGHT SELL OFF THOSE ACCIDENTAL PURCHASES OF ABOUT 150 STOCKS AND THAT IS WHAT RESULTED IN THE 440 MILLION DOLLAR CHARGE I’M BEING TOLD. IN OTHER WORDS, GOLDMAN SACHS HAS BEEN MENTIONED AS A POSSIBLE ADVISOR TONIGHT AS THEY TRY TO SEEK CASH OR A POSSIBLE DEAL. SOMETHING TO HELP THEM GET OUT OF THIS CASH CRUNCH THAT THEY ARE CURRENTLY IN AS A RESULT OF THESE ERRONEOUS TRADES. BUT AS WELL, GOLDMAN SACHS PLAYED AN UNSEEN PART IN HELPING TO UNWIND THESE ERRONEOUS TRADES ON WEDNESDAY AND IN THREE DAYS TIME BECAUSE OF T+3 SETTLEMENT RULES, KNIGHT IS GOING TO HAVE TO COME UP WITH THE MONEY TO PAY GOLDMAN. SO THAT WOULD BE MONDAY NIGHT THAT KNIGHT WILL HAVE TO PAY GOLDMAN 440 MILLION DOLLARS. THERE ARE QUESTIONS I’M TOLD AS TO WHETHER OR NOT KNIGHT WILL BE ABLE TO COME UP WITH THAT CASH. THE DEAL IS STILL A LITTLE BIT FLUID, THEY REACHED THIS AGREEMENT ON WEDNESDAY NIGHT IN PRINCIPLE, BUT WHETHER OR NOT IT GOES THROUGH, KIND OF DEPENDS ON WHETHER KNIGHT CAN SORT OF SECURE ITS CASH POSITION. THEY HAVE THE WEEKEND AND THEY HAVE MONDAY TO KIND OF FIGURE THINGS OUT IN ORDER TO MAKE THIS AGREEMENT WITH GOLDMAN SACHS AN OFFICIAL ONE.