KCG is putting the pieces back together. And not missing a trade along the way.
Like the mythical phoenix, KCG Holdings has risen from the ashes of Knight Capital and Getco. The rebirthed firm is taking the two separate market makers’ electronic trading groups, technologies, algorithms and order routing technology and integrating them into a single trading platform, said Charles Susi, head of product development for the firm’s client execution services group, in an interview with Traders.
Susi’s mission is to route the firm’s tremendous retail and institutional order flow into its electronic trading product platform. As if that were not enough, he’s revamping the firm’s algorithms and order routing technology and adding staff along the way. To coin a hockey phrase, KCG is changing on the fly.
“We are now a fully cross-asset, execution specialist firm,” Susi said. “We offer full service to our clients; from high-touch trading to fully-electronic algorithmic strategies.”
Susi explained that both Knight Capital and Getco had algorithmic trading businesses-Knight Direct and GES. He has been working on the integration of the two platforms; everything from product development to management and technology is being joined together. Getco had the algo and order routing technology, while Knight had the liquidity, so putting the two together was his mandate.
“KCG clients can benefit from the best of both worlds,” Susi said. “The offering essentially doubled in size and the goal was to provide a stable experience and make sure that changes were non-disruptive to our clients.”
Susi is no stranger to electronic trading, algorithms or smart order routing. He joined KCG last August. His charge is to focus on strategy, design and implementation of new products. It’s a new and senior role. Susi reports to Greg Tusar and Albert Maasland, co-heads of global execution services at KCG.
Susi was global co-head of direct execution at UBS.
He left last June, after spending five years at the Swiss firm, and was the second top official from UBS to leave the bulge shop’s direct execution, or electronic trading, department last year. His departure followed that of Scott Stickler, the firm’s global head of UBS’s Quant HQ initiative, which provides trading and other services for systematic, black box traders. Stickler left in February.
Susi acknowledged there was and still is some overlap among the two firms’ products and strategies and said there will be integration. KCG is already using some of Getco’s order routing and placement logic, smart order routing technology and co-located infrastructure as part of its algo platform.
“We’re not only connecting systems together, but will also ultimately be building a next-generation infrastructure within that single platform.”
However, clients who trade with KCG will still find a ready stable of algorithms, ranging from VWAP and TWAP to more aggressive liquidity-seeking strategies. KCG’s current algo offering, which doubled in size after the Knight/Getco merger, also includes algos that focus on small-cap securities and those that trade in the dark pools. It is in the latter, Susi told Traders, that the firm is spending a lot of time tweaking current offerings.
And the best is yet to come, Susi added.
“There is a lot of opportunity for us to create new products and custom build algos for our clients,” he said. “We’ve been very careful to not shut things off and give clients new products just for the sake of being new. The goal near term is to make things seamless for clients.”
KCG is not rushing to offer any brand new algorithms yet. But, while new ones could come in the future, he doesn’t believe that all algos are commoditized. To that end, he and his staff are spending consultative time with clients assessing their needs, either pointing them to one of the existing strategies created by KD or GES, or in some cases, customizing technology to suit a specific need. That is because while KCG might offer algos with similar missions, they use slightly different behavioral logic to achieve those goals.
Susi is taking his time with this process, describing himself as a fan of incremental change, noting it will take several months to determine whether/how any redundant strategies should or will be combined or retired.
“Our collective market-making expertise has taught us that nuances can be built into algorithms to help clients better access liquidity”, Susi said, “and that’s where the firm hopes to stand out – it can add basis points to performance. We’re going to continue to keep rolling things out quarter- by- quarter. If a client is using a VWAP algo from us, we want to make sure they’re getting the very best VWAP algo.”
