KCG Said to Seek at Least $300 Million for HotSpot UnitMatthew Monks and Sam Mamudi
KCG Holdings Inc., the trading firm formed in the aftermath of Knight Capital Group Inc.’s near collapse, is seeking at least $300 million for its currencies unit, people with knowledge of the matter said.
Working with Jefferies Group LLC on the sale, KCG has begun reaching out to potential buyers of the platform -- called HotSpot-- including Nasdaq OMX Group Inc., CME Group Inc., Intercontinental Exchange Inc., Deutsche Boerse AG, and London Stock Exchange Group Plc, the people said, asking not to be identified discussing private information.
KCG is also reaching out to other securities firms, the people said, and first-round bids are due next month. The Jersey City, New Jersey-based company today said it has “begun to explore strategic options” for HotSpot. KCG’s shares rose 1.1 percent to $10.86 in New York today, giving the company a market value of about $1.3 billion.
HotSpot’s network of more than 30 currency prime brokers provide credit for trading, according to its website. Clients include banks, hedge funds, high-frequency trading firms and corporations. Knight Capital bought HotSpot in 2006 for $77.5 million, according to a statement at the time.
Securities firms are struggling to maintain profits with U.S. stock trading dwindling. KCG today reported a loss of $9.6 million in the third quarter, compared with a profit of $227.8 million a year earlier. KCG fired 4 percent of about 1,200 workers, and at least five senior managers left in September.
The company was formed in 2013 after Knight Capital was forced to find a buyer after losses tied to trading glitches brought it near bankruptcy. Knight had bombarded U.S. exchanges with erroneous orders on Aug. 1, 2012, losing more than $450 million in the process. Chicago-based Getco LLC agreed to the merger at a time when dwindling equity volume was pressuring its own business.
Representatives for KCG, CME Group, Deutsche Boerse, and Nasdaq declined to comment. Representatives for Jefferies, LSE, and Intercontinental Exchange didn’t immediately return calls.