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Knight Capital Group

From Alfawiki
Knight Capital Group
Company typeSubsidiary
NYSE: KCG, until July 1, 2013
IndustryFinancial services
Founded1995
FateCombined with Getco LLC in 2013, creating KCG Holdings
HeadquartersJersey City, New Jersey, United States
Key people
Thomas Joyce, chairman and chief executive officer
ProductsMarket making and trading
Revenue$1.404 billion USD (2011)
$115.2 million USD (2011)
Number of employees
1,418 (2012)
Websitewww.knight.com

The Knight Capital Group operated as a U.S.-based global financial services company with expertise in market making, electronic trade execution, and institutional sales and trading.[1] Utilizing high-frequency trading systems, Knight was the leading trader in U.S. equities, commanding a market share of 17.3% on the NYSE and 16.9% on the NASDAQ.[2] Following a $460 million trading mishap in August 2012, Knight consented to an acquisition by Getco LLC in December of the same year. The transaction concluded in July 2013, resulting in the formation of KCG Holdings.

Company

Formerly identified as Knight/Trimark Group, Inc. and Knight Trading Group, Inc., Knight maintained numerous offices throughout the United States and abroad. Its Asset Management division was based in Minnetonka, with additional locations in Hong Kong, China, and London.

Activities

Knight’s principal operation involved market making within U.S. equities.[3] The Electronic Trading Group (ETG) managed over 19,000 U.S. securities and recorded an average daily trading volume surpassing $21 billion as of May 2012.[4] Additionally, Knight engaged in market making for U.S. options and European equity securities.

In terms of regulatory compliance, Knight resolved quote violation allegations in 2002 by paying $1.5 million without admitting fault.[5] Two years later, it reached a $79 million settlement concerning customer overbilling.[6] By 2008, the firm averaged trading nearly 4 billion shares daily.[7] In 2011, the company’s valuation stood close to $1.5 billion with an employee base of approximately 1,450.

Knight was also subject to allegations related to spoofing—an unlawful algorithmic trading tactic that distorts market demand by simulating false trade interests.[8]

Offices

Knight Capital Group maintained its main headquarters in Jersey City, New Jersey, and operated additional offices throughout the United States, United Kingdom, Germany, Switzerland, China, and Singapore.

Operating subsidiaries

The company’s operations were divided into four primary segments: equities, fixed income, currencies and commodities, and corporate services. Among its principal subsidiaries were Knight Capital Americas, L.P., Knight Execution & Clearing Services LLC, Knight Capital Europe Limited, and Hotspot FX Holdings, Inc. In 2009, Knight withdrew from the asset management business when its subsidiary Deephaven Capital Management divested most of its assets to Stark & Roth, LLC.

2012 stock trading disruption

On August 1, 2012, Knight Capital caused a significant market disturbance that resulted in a pre-tax loss of $440 million. The issue arose when a technician neglected to update one of eight SMARS servers with the latest Retail Liquidity Program (RLP) software. Consequently, that server activated an outdated 'Power Peg' function erroneously. This malfunction generated millions of unintended child orders affecting 154 different stocks over a span of 45 minutes, drastically influencing the share prices of 148 companies listed on the NYSE. For instance, shares of Wizzard Software Corporation escalated sharply from $3.50 to $14.76.

This event led to a dramatic decline in Knight’s stock value by more than 70%, highlighting a critical failure in their technology systems. In reaction to the crisis, on August 5, Knight secured roughly $400 million in capital from investors spearheaded by Jefferies. CEO Richard Handler along with Executive Committee Chair Brian Friedman orchestrated this financial rescue; Jefferies contributed $125 million and emerged as the largest shareholder through convertible securities.

The incident marked a significant blow to CEO Thomas Joyce, who had earlier expressed criticism toward Nasdaq’s management of Facebook’s IPO. On the day the disruption occurred, Knight’s stock fell by 33%, eventually losing about 75% of its market value soon after.

See also

External links

  1. ↑ Lua error in Module:Citation/CS1/Configuration at line 2123: attempt to index field '?' (a nil value).
  2. ↑ Knight Liquidity Statistics Archived 2012-06-09 at the Wayback Machine
  3. ↑ Lua error in Module:Citation/CS1/Configuration at line 2123: attempt to index field '?' (a nil value).
  4. ↑ Lua error in Module:Citation/CS1/Configuration at line 2123: attempt to index field '?' (a nil value).
  5. ↑ Lua error in Module:Citation/CS1/Configuration at line 2123: attempt to index field '?' (a nil value).
  6. ↑ Lua error in Module:Citation/CS1/Configuration at line 2123: attempt to index field '?' (a nil value).
  7. ↑ Lua error in Module:Citation/CS1/Configuration at line 2123: attempt to index field '?' (a nil value).
  8. ↑ Lua error in Module:Citation/CS1/Configuration at line 2123: attempt to index field '?' (a nil value).
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