Knight Capital Sells Brokerage Unit - Analyst Blog

By Zacks Equity Research,

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Knight Capital Group, Inc. ( KCG ) is nearing a deal to sell its credit-brokerage division to Stifel Financial Corp. ( SF ). Through this deal, the company will sell its U.S. and Europe-based investment-grade, high-yield, asset-backed and mortgage-backed debt brokers.

The deal could be announced publicly as soon as Feb 25, 2013. Bank of America Corporation ( BAC ) acted as advisor to Knight Capital on the sale.  

Earlier, in Dec 2012, The Global Electronic Trading Company or Getco LLC agreed to acquire the troubled automated trading firm for $1.4 billion. The cash-and-stock deal is expected to close in the first half of this year.

N.J.-based Knight Capital is a financial services company, executing buy and sell orders in stocks and options through Computer models. They account for roughly 10% of the U.S. equity trading volume. Chicago-based Getco is one of the biggest high-frequency trading firms.

Knight Capital - considered as one of the most advanced trading platforms - lost nearly $461.1 million owing to a software malfunction in August this year. The malfunction sent umpteen numbers of accidental orders to the market over a 45-minute period, leaving the company in a precarious financial position

Consequently, Knight Capital had to seek rescue financing to the tune of $400 million. A group of investors, including Getco LLC, Jefferies Group, TD Ameritrade Holding Corporation ( AMTD ), Stifel and Stephens Inc., provided the finance in exchange of over 70% stake in the company.

We believe the deal between Knight Capital and Stifel will result in a more powerful trading platform. This will help the market participants to avail better facilities and make trading much simpler.

Currently, Knight Capital carries a Zacks Rank #2 (Buy).

TD AMERITRADE (AMTD): Free Stock Analysis Report

BANK OF AMER CP (BAC): Free Stock Analysis Report

KNIGHT CAP GP (KCG): Free Stock Analysis Report

STIFEL FINL (SF): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: AMTD , BAC , KCG , SF

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