It seems that Knight Capital's ended up buying at the offer and selling at the bid. In order words, Knight Capital essentially collected the opposite of a rebat

It seems that Knight Capital's ended up buying at the offer and selling at the bid. In order words, Knight Capital essentially collected the opposite of a rebate by paying someone for no reason aside from attempting to create liquidity in the market which resulted in these losses. As a result, they were pushing stocks higher and higher which causes a huge incentive for a system like Knight Capital have. Again, this explains not only some volume surge which was seen on the market but also massive moves in certain stocks like China Cord Blood Corporation (CO) [1] who rose several hundred percent, until someone finally stepped in & the important thing here to note that there isn't a reason under the current SEC order cancellation methodology to bail out Knight Capital and its algorithm. Similarly, they were trading Exelon Corporation (EXC) [2] and were losing $0.15 on every single trade and when its being done 2.4k times per minute, its very easy to lose money. [1] http://finance.yahoo.com/q?s=co&ql=1 http://finance.yahoo.com/q?s=co&ql=1 [2] http://finance.yahoo.com/q?s=EXC&ql=0 http://finance.yahoo.com/q?s=EXC&ql=0