Thomas Joyce, the Knight Capital Group Inc. chief executive officer whose tenure was shaken by the firm’s $457.6 million trading loss in August, told directors he has discussed taking a job elsewhere, the Wall Street Journal said, citing people close to the negotiations.
Joyce, whose contract expires at the end of the year, said he had preliminary talks with New York-based brokerage E*Trade Financial Corp., according to the story on the newspaper’s website.
Knight’s board doesn’t discuss confidential matters, spokeswoman Kara Fitzsimmons said in an e-mail to Bloomberg. Katie Spring, a spokeswoman for Citadel, declined to comment.
“I’m looking forward to continuing discussions with the board and working for Knight over the next few years,” Joyce said, according to the statement e-mailed by Fitzsimmons. He declined to comment on the Journal story.
Joining E*Trade would unite Joyce with a company that tried and failed to acquire Knight as it veered toward bankruptcy in August — Citadel LLC. The Chicago-based hedge fund is E*Trade’s largest shareholder and its founder, Ken Griffin, is leading the search for a CEO, the company said in August 2011.
On an Oct. 17 conference call with analysts following the firm’s earnings report, Joyce said employee retention was “good to great” in the aftermath of the trading mishap. In a Sept. 21 interview on Bloomberg Television, he said any changes at Knight will be decided in cooperation with the board when the firm discusses strategy later in the year.
Lost Value
Joyce has been the “point man on Knight’s strategy,” Rich Repetto, a New York-based analyst for Sandler O’Neill & Partners LP, said in an e-mail. “If he left, that would likely signal a significant change from the diversification strategy he put in place.” Repetto also said E*Trade needs “someone who knows retail brokerage and can reduce costs but it would also be helpful to understand banking and credit issues and be able to work with bank regulators.”
Knight grew over the last decade from a market maker that mainly handled orders from individuals sent by brokers to a financial services company with institutional clients, electronic trading services and businesses in fixed income and currencies. The company provides research and asset management and got into the reverse mortgage business in 2010.
Joyce held 1.3 percent of Knight’s common stock as of Jan. 31, a stake that fell by $17 million during the first week of August as the shares slid below $4 from as much as $13.53 earlier in the year. Knight shares haven’t traded above $3 since Aug. 15 after the sale of convertible securities diluted holders by more than 70 percent.
Computer Malfunction
Knight was taken over by six Wall Street firms including Jefferies Group Inc. and Blackstone Group LP in August after losses associated with a computer malfunction depleted its capital. The investors, who paid $400 million for securities convertible into more than 70 percent of Knight’s equity, are represented by three new Knight directors.
Last month, the trading firm consolidated oversight of its finances and operations under a single executive and reassigned its technology chief. Steven Bisgay, Knight’s chief financial officer since August 2007, was named to the additional post of chief operating officer. Steven Sadoff, the executive who had been in charge of operations and technology, moved to a role with Knight’s clearing, prime brokerage and futures businesses.
Knight bombarded U.S. equity exchanges with erroneous orders on Aug. 1 after software that had been installed improperly malfunctioned, according to Joyce. The trading caused volume to surge and prices to swing in dozens of securities.
In its 10-K filing with the Securities and Exchange Commission filed on Feb. 29, Knight said Joyce is the only key executive with an employment contract.
“Our success will be dependent to a large degree on our ability to retain the services of our existing key executives and to attract and retain additional qualified personnel in the future,” it wrote. “Competition for such personnel is intense.”
