Cha-ching! Blackstone, GETCO, Jefferies and the other firms that stepped in with a lifeline for Knight Capital have – on paper – doubled their money in less than a day. Who says America isn’t the land of opportunity? The group is buying $400m of convertible shares in Knight, which short-circuited last week when a computerised trading system malfunctioned, resulting in a $440m loss that threatened to send the company into bankruptcy. The convertibles give the buyers the right to purchase 267m shares in Knight at $1.50, about half of the trading price yesterday. The buyers will get 70 per cent of Knight at a valuation of less than 5 times last year’s net income.

That looks cheap, but after last week’s “technology issue,” there are growing risks not just for Knight but its industry, as well. Knight is a market maker, a middle man ensuring trading in stocks when there is not a ready buyer for every seller and vice versa. Once concentrated in trading pits, technology revolutionised the business and computer systems dominate US stock market trading. Knight’s computer glitch comes after othere snafus in recent years. Among the more ironic: a problem that scuttled the public listing of BATS Global Markets on its own exchange.

It is still unclear what what happened after Knight’s computers started making bad trades (the off swich is usually at the back, people) and how much it will cost to get the sytem working right. There are also unknown liabilties from regulatory fines, and shareholder lawsuits. And calls for better controls on these systems, which could cost money and affect how, and at what margins, Knight and its peers do business in the future.