October 1, 2013

Knight Up; Getco Down

Knight Up; Getco Down

By By Peter Chapman

According to a recent report by Sandler O'Neill & Partners, the fortunes of Getco and Knight Capital Group, which recently merged to form KCG Holdings, were diverging in the months prior to the combination. Market-making trades and volumes were in decline at Getco during the nine months prior to the July 2 merger. They were on the rise at Knight during the period.

During the first three quarters of 2012, Knight accounted for 63 percent of the combined company's market-making dollar volume, Sandler analysts reported. Getco accounted for 37 percent. In the succeeding three quarters, Knight's volume represented 74 percent. Getco's volume accounted for 26 percent.

"We suspect/speculate legacy Knight dollar volumes have been supported by customer order flow, particularly the online brokers, while Getco's have generally declined with overall industry volumes and volatility," the report's authors stated.

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