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Knight Capital Reports a Loss Amid Trading Slowdown, Asset Sale

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May 1 (Bloomberg) -- Knight Capital Group Inc., the market-maker that agreed to be sold to Getco LLC following a computer error, reported a quarterly loss as trading slowed and the company sold its institutional fixed-income business.

The net loss was $9.4 million, or 3 cents a share, in the first quarter, compared with a profit of $33.1 million, or 36 cents a share, a year earlier, the Jersey City, New Jersey-based company said today. Excluding losses from discontinued operations and expenses related to the takeover, the August trading error and a reduction in workforce, earnings were 6 cents a share. That exceeded the 4-cent average analyst estimate, data compiled by Bloomberg show.

“Revenues from continuing operations were strong despite a decline in consolidated U.S. equity volume year over year and the lowest quarterly market volatility in more than five years,” Chief Executive Officer Thomas Joyce said in a statement today.

Knight’s revenue from ongoing operations declined 5.7 percent to $285.2 million from a year earlier. Analysts had estimated sales of $321.3 million in the quarter.

U.S. exchange-listed equity trading volume averaged 6.35 billion shares a day last quarter, down 6 percent from the first three months of 2012, data compiled by Bloomberg show. Volatility as measured by Chicago Board Options Exchange Volatility Index, or VIX, dropped to the lowest level in six years amid unprecedented global central bank stimulus as well as improving economic and corporate data.

Getco Deal

Knight Capital agreed in December to be purchased by Getco in a $1.4 billion deal, ending its 17 years of independence. Getco, a closely held high-frequency trading company, was among six financial firms that bailed out Knight Capital in August, after trading glitches caused more than $450 million in losses and brought the company to the brink of bankruptcy.

Merging Knight Capital and Getco will generate annual savings of as much as $110 million through cost reductions. The elimination of redundancies in infrastructure and personnel will help cut expenses by $20 million to $30 million during the first year of the merger, according to a statement from Knight last month. Annual savings will increase to $90 million to $110 million by the third year, the company said.

Knight Capital said in February that it will reduce its workforce by 5 percent as it combines sales teams and discontinues its clearing business. The company agreed in March to sell its institutional fixed-income sales and trading business to brokerage Stifel Financial Corp. for an undisclosed amount.

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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