* CEO says firm is well capitalized
* Will only move forward deal "if it makes strategic sense"
NEW YORK Nov 25 Knight Capital Group,
currently in talks with at least two firms on the possible sale
of its largest business unit, is well capitalized and would only
pursue a deal if it created value for its shareholders and
clients, Knight's chief executive said in an internal memo.
The electronic trading firm has been approached by rivals
Getco LLC and Virtu Financial LLC about its market-making
operation, which uses computer models to match buy and sell
orders in stocks and options, executing around 10 percent of
U.S. volume, according to people familiar with the talks.
"To that end, our board of directors and management team
regularly consider opportunities that are potentially strategic
or collaborative in nature to enhance shareholder value and
improve our offering to clients," Knight CEO Tom Joyce said in a
note to employees on Saturday, seen by Reuters. The talks were
first reported by the Wall Street Journal.
Knight was forced to take on new investors following a
software glitch on Aug. 1 that unleashed a flood of orders to
the New York Stock Exchange, resulting in a massive position
Knight had to unload at a loss, nearly bankrupting the firm.
In October, Knight posted a third-quarter loss of $389.9
million. But Joyce said the company was better capitalized than
it was before the glitch - a point he reiterated in the memo to
"Given our recapitalization, rapid client re-engagement and
rebound in trade volumes, there is no need for Knight to pursue
a partnership, transaction or any other undertaking," he
said. "We would only move forward with such an initiative if it
makes strategic sense for our shareholders and our business."
Getco and Virtu spokespeople have declined comment on the
Getco was one of the firms involved in the $400 million
rescue of Knight in August, led by Jefferies Group.
Others included Blackstone Group LP, Stephens Inc, and
financial services companies TD Ameritrade Holding Corp
and Stifel Financial.
As part of the deal, Getco investor General Atlantic, as
well as Blackstone and TD Ameritrade, were given seats on
Aside from being a top U.S. market maker, Knight runs bond
and foreign exchange trading platforms and owns a reverse
mortgage lender. It also holds a stake of about 20 percent in
Direct Edge, the No. 4 U.S. cash equities exchange.