Knight Capital Group (KCG) and Getco have completed their merger and are set to build their sell-side business in the coming months.
The merger, which was announced in December 2012 and was approved by shareholders on 25 June 2013, will see the two businesses come together under Knight Holding Company, a new publicly traded business. The new company will be the largest designated market maker on the New York Stock Exchange floor.
Both businesses are targeting growth in Europe and expect their sell-side client base to be particularly fast-growing as changing market conditions put pressure on firms.
"We're seeing a lot of changes affecting the sell-side at the moment from low volumes to regulatory reform," said Albert Maasland, Head of Global Execution Services and Platforms at KCG Europe Limited. "We're getting a lot of enquiries and significant volume growth from regional banks, as well as institutional and retail brokers in both Europe and elsewhere and we expect this will continue."
For the buy-side, Maasland said it will be "business as usual" and most buy-side clients will see little change following the merger in the near term.
By combining the two businesses, Knight is hopeful that it can benefit from economies of scale to help it compete in a "tough" European market environment.
"Scale is really important today. By being part of a larger group we will see more volumes and support better and more efficient execution for all of our clients. This merger will really help us get ahead of consolidation in the European market," added Maasland.
By being a listed business, Knight will also benefit from being transparent with regular public reporting, something it said clients were increasingly looking for.
Initially, operations will be combined with limited changes to existing products and services in the near term. Harmonising the client businesses of the two firms will be a priority, and other synergies will be developed, including unified membership of each exchange.
Both Getco and Knight said their business in Europe has been growing prior to the merger and it is now expected to ramp up significantly as they become more efficient and widen their service offering to clients.
The company will formally launch under its new corporate identity today with a new website and branding. It will also launch as a combined NYSE designated market maker unit.
Prior to agreeing to merge with Getco, Knight Capital Group suffered a US$440 million pre-tax loss after it deployed a rogue algorithm on 1 August 2012. The technology error pushed Knight stock down 33% on the day and had erased 75% of its value by the following day. Shortly afterwards, Knight investors raised US$400 million via convertible securities to help the firm stay in business.