The story of Knight Capital’s flameout trades that almost landed it in bankruptcy and into the waiting arms of several white knights, is getting more and more curious.

Knight Capital

It turns out that a hitherto unnamed party, Scottrade, was also given a last-minute stake in the rescue operation, as per a report by Charlie Gasparino in Fox Business Network.

Read here on ValueWalk how an errant computer program entered trades into the market that ultimately caused Knight a $400 million loss.

Knight Capital Group Inc. (NYSE:KG) was able to stay in business with the help of a bailout, arranged with a consortium of six investors that filled in the cash hole of $400 million, in return for 2% preferred stocks that would later convert into 267 million shares at roughly $1.50 a share. The participant white knights were Getco, Jefferies Group, Inc. (NYSE:JEF), Stifel Financial Corp. (NYSE:SF), Nicolaus & Company, TD Ameritrade Holding Corp. (NYSE:AMTD), and the The Blackstone Group L.P. (NYSE:BX).

At the time there was no mention of Scottrade, and save the report by Fox Business, there is no official confirmation by Knight to date regarding the firm, who also was a major client of Knight’s, being another member in the bailout team.

However, according to sources, Scottrade has a much smaller stake, about $10 million, in comparison to the other players. Even so, Knight Capital Group Inc. (NYSE:KG) chief executive Tom Joyce had to step in and persuade the other participants to reduce their proportionate stakes to accommodate Scottrade. Why so? The answer is that it really was a very sweet deal – the white knights got shares at $1.50, while Knight quotes today at $2.79. That sounds like easy money! In fact market functionaries call it a virtually no-risk deal.

Why was Joyce compelled to step in on behalf of Scottrade? That’s easily answered by Wall Street’s “you-scratch-my-back-I-scratch-yours,” old-boy network that relies on quid pro quos to swing deals in a situation, such as Knight found itself in earlier in August.

Yet, the action to include Scottrade, and more curious, the decision not to make the fact public could invite criticism from shareholders nursing financial wounds from the debacle – there could in fact be a view that Knight gave away too much to the ‘rescuers’, at the expense of its shareholders.