Getco makes offer for trading firm Knight Capital

Getco Holding Co. has made a cash-and-stock bid for troubled trading firm Knight Capital that it values at $3.50 per share.

The news sent Knight shares soaring almost 20 percent, exceeding the offering price, before the market opened Wednesday.

In a letter to Knight Capital's board and CEO, Getco said the acquisition would involve a two-step process in which 242 million new shares would be issued, followed by a tender offer for an additional 154 million shares.

Chicago-based Getco already owns about 31 percent of Knight's outstanding shares.

News of the offer comes just days after the Wall Street Journal reported that Knight had spoken to at least two rivals that are interested in buying its market-making business and expected to receive proposals this week.

Knight takes stock trading orders from big brokers like TD Ameritrade and E-Trade. It routes the orders to exchanges including the New York Stock Exchange.

On Aug. 1, Knight sent numerous erroneous orders in 140 stocks listed in the New York Stock Exchange.
Those orders were behind some sudden swings in stock prices and surging trading volume. The company said the problem triggered when it installed new trading software. The company's stock price plunged about 75 percent in two days and it teetered near collapse.

Later Knight Capital Group Inc., based in Jersey City, N.J., accepted a $400 million infusion of cash, essentially selling control of the firm to a group of financial firms that was led by the Jefferies Group and included Getco.

Getco said in its letter that its CEO, Daniel Coleman, would lead the new company, and Knight CEO Tom Joyce would become non-executive chairman. Knight on Wednesday postponed its investor meeting set for Monday.

Chicago: Trading firm Getco cuts 40 workers

Getco LLC, one of Chicago's largest trading firms, last week cut about 40 employees globally, including at least one top manager, as the firm realigns its focus and operations under a new CEO, according to sources familiar with the reduction.

Among those cut was managing director Edward Boyle, 49, who was based in Chicago and had business development duties across the firm, the sources said. He had joined Getco in late 2010 from NYSE Euronext, where he had overseen that exchange company's options business.

His departure follows the exit of several other senior managers in the past year, including David Babulak, who was also a managing director; Michael Rauchman, who was the company's chief technology officer; Brian Nigito, who was a top manger in New York; and Patrick Tray, who was a trading manager for the firm in Chicago.

A Getco spokeswoman declined to comment.

Getco, a top electronic market-maker at the New York Stock Exchange that is active in 50 markets around the world, is restructuring the firm and its focus in the wake of promoting Daniel Coleman as CEO in February.

Mr. Coleman, who was previously the company's global head of equities and client services, stepped up as the company's Chicago co-founders, Stephen Schuler and Dan Tierney, stepped back. The company has said previously that it has about 400 employees.

While Mr. Schuler and Mr. Tierney still own part of the company, they started answering to an outside investor in the firm when Greenwich, Connecticut-based General Atlantic took a minority stake in 2007.

Getco is not only a market maker on the exchanges, it also own stakes in several electronic ones, including the Chicago-based Eris Exchange, Bats Exchange and NYSE Liffe U.S.

Getco was founded in 1999 and has 400 employees.

Trading firm Getco names CEO

(Crain's) — Trading firm Getco LLC today named Daniel Coleman CEO, effective immediately.

Mr. Coleman joined the Chicago-based firm in 2010. He previously was global head of equities at UBS.

“Daniel is perfectly aligned with our long-term vision of utilizing technology to transform how investors transfer risk,” Getco Co-founder Dan Tierney said in a statement Monday.

Mr. Tierney and co-founder Stephen Schuler will remain on Getco's board; Mr. Schuler takes the newly created position of executive director.

“Stephen and Dan built an amazing firm that has been a catalyst for positive change in the financial markets for the last 12 years," Mr. Coleman said in the statement

Getco was founded in 1999 and has 400 employees.

The Wall Street Journal reported Mr. Coleman's appointment Sunday.

Securities dealer Getco acquires Bank of America's NYSE biz

Getco LLC, the Chicago-based trading firm, said it acquired the New York Stock Exchange market-making business of Bank of America Corp. Terms of the purchase were not disclosed.

The combination will make Getco the second-largest designated market-maker at the New York Stock Exchange. It will handle 650 company stocks and a total of 850 securities, the company said in a news release. It will take on its new responsibilities on a rolling basis through December.

"Many companies are looking for a way to navigate today's complex marketplace and our global scale allows us to provide them with increased liquidity, better pricing and unique market insights," said Daniel Coleman, the global head of Getco's equities and client services.

Latour Trading unseats Goldman to become the number one player on the NYSE

Traders were left bemused last week when it emerged that a mystery trading firm had unseated Goldman Sachs to become the number one player on the New York Stock Exchange's closely watched program trading list during the last week of September.

Financial News has found that, at the same time as Latour Trading was rising up the NYSE list, another unknown trading company, Spire Europe, took the No. 2 spot on Nasdaq OMX's Nordic market for September.

We have also discovered that the similarity in the names of the two firms and the timing of their ascent is no coincidence.

According to NYSE's weekly report, Latour Trading was the most active firm on the list for the last week of September and the first week of October, trading some 484.6 million and 568.8 million shares respectively. The list, which breaks out principal trading, is used by market-watchers as a proxy for the most active proprietary trading desks. Proprietary traders are traditionally a secretive bunch due to the highly competitive nature of their strategies.

According to Nasdaq data, Spire was second only to Getco, the well-known Chicago-headquartered firm, among high-frequency players during the month by market share, and the 11th-largest provider of liquidity overall. It traded equities worth EUR3.6 billion.

According to filings with the U.K.'s Companies House and the U.S. Securities and Exchange Commission, both firms are wholly owned subsidiaries of Tower Research Capital, a New York-based hedge fund that specialises in high-frequency trading strategies. These firms typically use their own capital to trade large volumes across markets in a fraction of a second using sophisticated technology.

Tower Research Capital was founded in 1998 by Mark Gorton, who had worked in the proprietary trading division at Credit Suisse. The company hit the headlines last year during the trial of Societe Generale trader Samarth Agrawal who was convicted for stealing proprietary trading code from the French bank. Agrawal was leaving SocGen to join Tower Research.

According to SEC filings, Latour was founded in 2009 and is also active on the Chicago Board Options Exchange. The company, which occupies a floor of the same Broadway building as Tower Research, employs one person thought to be the company's chief executive, David Faucon. Faucon helped build the high-frequency trading desk at Societe Generale.

Spire was first established in 2006 but only began trading in 2009. According to sources familiar with the matter, Spire is active on Chi-X Europe, while public data shows it is also active on the London Stock Exchange , NYSE Euronext and the Swiss markets.

Scott Johnston, Tower's chief operating officer, confirmed that Latour and Spire are SEC and FSA-regulated subsidiaries respectively and added: "Latour is a member of most US equity exchanges and is a registered marketmaker on Nasdaq, Arca and Bats. Spire Europe is a member of, and marketmaker on, European equity exchanges and MTFs."

Getco hires FSA's Jennifer Boneham

(Financial Times) Getco has hired Jennifer Boneham, a senior staffer at the UK’s Financial Services Authority, in the latest sign that the US proprietary trading and market-making firm is tapping talent at regulators and rival businesses as its grows its business Europe.

It comes four months after Getco hired Elizabeth King, an expert at the Securities and Exchange Commission, the FSA’s US counterpart. The 14-year SEC veteran was an associate director at the agency’s market division before joining Getco’s legal department.

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High-Frequency Trading Faces EU Market Abuse Probe

(Bloomberg) -- High-frequency trading faces a European Union clampdown, as regulators investigate whether traders could use the practice to manipulate financial markets.

The European Commission, the EU’s executive arm, said it’s summoning hedge funds and banks “in the coming months” for fact-finding talks on the practice, as it considers stricter rules on market abuse due before the end of the year.

“We’re looking into high-frequency trading as part of the review of the Market Abuse Directive,” Chantal Hughes, a spokeswoman for Financial Services Commissioner Michel Barnier, said in an e-mail. “We want to make sure that the review captures technological developments.”

U.S. lawmakers have questioned whether the practice is benefiting Wall Street at the expense of individual investors. The Securities and Exchange Commission sought input from securities professionals on strategies used by high-frequency traders in January. EU officials met financial companies the same month to gather information.

High-frequency trading entails hedge funds and other firms using powerful computers to execute orders in milliseconds to profit from tiny discrepancies in the prices of shares.

“The high-frequency trading case is difficult because no- one is saying it does any harm,” Simon Gleeson, a regulatory specialist at Clifford Chance LLP, said in a telephone interview in London today. “No one has complained about it.”

Abusive Trading

The current Market Abuse Directive, which came into force in 2005, sets common rules across the 27-nation EU. The law requires firms to report suspected abusive trading to regulators.

“I will look at the Market Abuse Directive to extend its coverage,” Barnier said in a speech in London last month. “We cannot have different sanctions in case of non-application of the rules or abuse.”

Changes to the law would need to be approved by finance ministers and members of the European Parliament before entering into force.

The practice now accounts for 42 percent of the U.S. market, Celent, a consulting firm in Boston, said in a study in December. Proponents of the technique say it has lowered fees, boosted liquidity and increased volume. Firms such as Citadel Investment Group LLC, Getco Holding Co LLC, and Optiver Trading U.K. Ltd. operate high-frequency trading in Europe.