Knight Capital Group’s (KCG) futures division plans to utilise Getco technology to enhance its offering and focus on high-frequency trading (HFT) and hedge fund business.
Following the merger of Knight Capital and Getco, which formally completed at the end of June, futures commission merchant (FCM) KCG Futures said the business’ direction would be a mix of continuity and change, as it seeks to maintain service levels while also leveraging the advantages of being a combined group.
Carl Gilmore, managing director of KCG Futures, said: “Maintaining continuity in the services we provide is important, but we also want to integrate our offering into the larger group, such as bringing our services to customers in other parts of our business.
“But one of the biggest benefits of the merger with Getco is the strength of the technology that KCG can now offer. There’s a real need in the futures space right now for better technology and this will be a key part of where we anticipate the business will go.”
Listed derivatives volumes, including futures, have suffered in the wake of the financial crisis, and figures from the Futures Industry Association (FIA) show a fall of 15.3% between 2011 and 2012 to 21.17 billion contracts traded worldwide. According to the FIA, a decline in interest rate futures due to the 0% interest rate environment that has prevailed in the wake of Lehman Brothers collapse is largely responsible for depressed volumes.
However, Gilmore believes there is reason for optimism: “I think we’re now on an upswing after five difficult years for FCMs. We think there’s a real opportunity now to push into highly customised offerings, which is what many clients are now demanding in the futures space.”
He also notes that market participants are starting to return to the futures market and improving economic conditions in the US, particularly the tapering of the Federal Reserve’s quantitative easing program, bode well for the asset class.
KCG Futures is also keen to exploit opportunities with HFT and hedge funds by heavily focusing on its automation.
“We really want to be the go-to destination for highly sophisticated investors, and for them it is all about how you use your technology to operate efficiently, so our goal is to offer our services to clients in as automated a way as possible.”
KCG Futures is formed primarily of Knight Capital’s futures division, which itself was created when Knight bought the futures business of trading services group Penson Worldwide in May 2012.