Profile: Knight Capital Group Inc (KCG)

Knight Capital Group, Inc., incorporated on November 17, 1999, is a global financial services company. The Company provides access to the capital markets across multiple asset classes to a network of clients, including buy- and sell-side firms and corporations. The Company operates in four segments: Market Making, Institutional Sales and Trading, Electronic Execution Services, and Corporate and Other.

Market Making

The Company’s Market Making segment principally consists of market making in global equities and listed domestic options. As a market maker, it commits capital for trade executions by offering to buy securities from, or sell securities to, institutions and broker-dealers. Its Market Making segment primarily includes client, and to a lesser extent, non-client electronic market making activities in which it operates as a market maker in equity securities quoted and traded on the Nasdaq Stock Market, the over-the-counter market for New York Stock Exchange (NYSE), NYSE Amex Equities (NYSE Amex), NYSE Arca listed securities, and several European exchanges. As a complement to electronic market making, the Company’s cash trading business handles specialized orders and also transacts on the OTC Bulletin Board, marketplaces operated by the OTC Markets Group Inc. and the Alternative Investment Market (AIM) of the London Stock Exchange. It provides trade executions as an equities Designated Market Maker (DMM) on the NYSE and NYSE Amex. Market Making also includes its option market making business which trades on sall domestic electronic exchanges. The Company offers products and services through electronic and voice access points primarily to global, national, regional and on-line broker-dealers, and traditional investment banks in North America and Europe. It provides these clients with deep liquidity, high fulfillment rates and high-quality trade executions according to client-defined and regulatory measures.

Institutional Sales and Trading

The Company’s Institutional Sales and Trading segment includes global equity, exchange traded funds (ETF) and fixed income sales and trading; reverse mortgage origination and securitization; capital markets, and asset management activities. The primary business of the Institutional Sales and Trading segment is to execute and facilitate equity, ETF, and fixed income transactions as agent on behalf of institutional clients, and we commit capital on behalf of its clients when needed. This segment also facilitates client orders through program, block, and riskless principal trades and provides capital markets services, including equity and debt offerings as well as private placements. Urban Financial Group, Inc. (Urban), a contributor within this segment, is an originator of home equity conversion mortgages (HECMs), referred to as reverse mortgages, insured by the Federal Housing Administration (FHA). Urban also securitizes these loans into HECM Mortgage Backed Securities (HMBS), which are sold through its fixed incomes sales network to third parties.

The Company offers products and provides services through various access points primarily to its buy-side clients, including mutual funds, pension plans, plan sponsors, hedge funds, trusts and endowments across North America and Europe. It provides buy-side clients with deep liquidity, actionable market insights, anonymity and trade executions with minimal market impact.

In fixed income sales, its buy-side clients include mutual funds, insurance companies, pension funds, hedge funds and banks across North America and Europe. It provides buy-side clients with access to investment research, a broad range of securities and products, trading expertise and an extensive client network to match buyers and sellers. Urban’s market primarily comprises homeowners throughout the United States and Puerto Rico that are eligible for reverse mortgages. The Company also provides capital markets services to small- and mid-cap corporate issuers, as well as private companies in the United States and Europe. It offers corporate issuers and private companies capital structure advisory services, transition services and access to its client distribution network.

The Company offers clients a range of products and services and voice access to the global markets including sales and trading for equities, ETFs, options and fixed income securities (including high yield and high grade corporate bonds, distressed debt, asset and mortgage-backed securities, federal agency securities, hybrid securities, syndicated bank loans and emerging markets). It also provides soft dollar and commission recapture programs, as well as capital markets and asset management activities. The Company provides buy-side clients with deep liquidity, actionable market insights, anonymity and trade executions with minimal market impact. It also publishes research reports across several sectors in the Americas, United Kingdom and emerging markets evaluating corporate risk, interest rate risk and individual issuers. For its buy-side clients, it offers comprehensive trade execution services covering the depth and breadth of the market. Through Astor Asset Management LLC, it provides asset management services primarily to retail investors employing a portfolio management approach to investing involving modeling economic data and utilizing low cost ETFs to capitalize on cyclical changes.

Electronic Execution Services

The Electronic Execution Services segment offers access through its electronic agency-based platforms to markets and self-directed trading in equities, equity options, fixed income, foreign exchange and futures contracts. In contrast to Market Making, the businesses within this segment generally do not act as a principal in the transactions that are executed and generally earn commissions for acting as an agent between the parties to the trade. Through its Knight Direct platform, it provides a comprehensive, customizable execution management system that provides clients with the ability to execute trades across asset classes through an array of global destinations. The business offers direct market access trading through the use of EdgeTrade algorithms or through internal crossing through its Knight Match product.

Through its Knight Hotspot FX platform, it provides electronic foreign exchange trading solutions to buy-side and sell-side firms through a foreign exchange ECN that provides clients with access to live, executable prices for 60 currency pairs, as well as spot gold and silver streamed by market maker banks and other clients. The Knight Hotspot FX platform offers clients several access options, including direct high-speed connectivity and a front-end application. Through its Knight BondPoint platform, it provides electronic fixed income trading solutions to sell-side firms. Knight BondPoint operates a fixed income ECN that serves as an electronic inter-dealer system and allows clients to access live and executable offerings for retail-sized orders. Knight BondPoint also provides a front-end application for brokers and advisors, as well as a trading application for traders.

Corporate and Other

The Company’s Corporate and Other segment invests in strategic financial services-oriented opportunities, allocates, deploys and monitors all capital and maintains corporate overhead expenses and all other income and expenses that are not attributable to the other segments. The Corporate and Other segment houses functions that support our other segments, such as self-clearing services, including securities lending activities. The Corporate and Other segment includes its futures commission merchant (FCM) which consists of certain assets and liabilities that were acquired or assumed from the futures division of Penson Financial Services, Inc. (Penson) on June 1, 2012. This business primarily provides futures execution, clearing and custody services to facilitate transactions among brokers, institutions and non-clearing FCMs on United States and European futures and options exchanges.