Virtu Financial Buys KCG

In a $1.4 billion deal, the two HFT firms will merge into a market-making and agency execution company.

merger-jigsaw

High-speed trading firms Virtu Financial has agreed to acquire rival KCG Holdings in a $1.4 billion deal that will greatly expand Virtu’s market share and build a market-making and agency execution company.

The deal—a cash transaction valued at $20 per KCG share—is expected to close in the third quarter of 2017 subject to shareholder and regulatory approvals. By buying KCG, which was formed by Knight Capital Group and Getco in 2012, Virtu will now be tapping into its client base and broadening its technology distribution as a combined company.

Virtu CEO Douglas Cifu said acquiring KCG is in line with the company’s goal of expanding its agency execution business.

KCG fits perfectly with Virtu’s strategic priorities to apply our market-making and technological expertise to customer wholesale order flow, and expands Virtu’s growing agency execution business by offering clients a combination of Virtu and KCG’s superior algorithms and proprietary analytical tools,” Cifu said. “In addition, there is immediate opportunity for revenue growth and significant cost savings.”

Cifu will remain the CEO of the combined firm and Virtu CFO Joseph Molluso will retain his title.

Rumors swirled in March over the potential merger of the two companies, news that was confirmed by Virtu when it announced that it had made an offer to KCG.

Just a few months ago, it was KCG doing the buying. In October, KCG completed its acquisition of Swedish agency broker Neonet Securities in a bid to expand its European footprint and execution services portfolio.

KCG averaged $26.3 billion in volume traded in March with about 10.4 billion shares traded on its market-making division. Its institutional equities business averaged 206 million US equity shares per day while its KCG BondPoint platform had $282.9 million in fixed income par value per day.

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