Knight to merge trading services

Knight Capital has revealed plans to combine its sales trading and electronic execution businesses.

Knight Capital has revealed plans to combine its sales trading and electronic execution businesses.

In a Q4 results statement, chairman and CEO Thomas M. Joyce said the consolidation of the US broker and market maker’s full service and electronic execution teams would form part of the broker’s “continuing efforts to align and focus resources”.

Knight’s electronic execution services generated revenues of US$36.8 million last quarter, while the institutional sales and trading division made US$114.8 million in revenue, according to the results.

The new combined institutional equities sales team will be jointly led by head of institutional equities Joseph Mazzella, and head of international Albert Maasland. As a result of the consolidation, David Lehmann, head of electronic execution services, will leave the firm.

Meanwhile, Knight’s algorithmic trading and market-making units both ended 2012 with an increase in shares traded.

Knight Direct, which offers algorithms for institutional investors in the US and Europe, traded an average of 237.5 million shares per day in December, up 7.1% from the 221.89 million recorded the previous month and up 16.6% from December 2011.

Knight’s US market making volume grew to an average of 3.1 billion shares traded per day in December – up 12.7% from November and 14.2% from December 2011.

The positive volume growth comes despite a 84% fall in Q4 profits for Knight Capital, compared to Q4 2011. The embattled broker endured a tough 2012 after a technical glitch in its market making unit led to losses of over US$450 million in under an hour.

“In the fourth quarter of 2012, Knight fully recaptured market share in core product areas and returned to profitability,” said Joyce. “Nevertheless, the financial results for the quarter were negatively impacted by the steep year-over-year declines in consolidated US equity volume and market volatility, as well as the write-down of an investment and heightened professional fees.”

Joyce also affirmed his commitment to Knight’s merger with electronic market making firm GETCO, initially agreed in December. The deal, worth US$1.4 billion, will create a new publicly-traded holding company and will offer market making and agency brokerage services across geographies and asset classes.