KCG CEO Wants Wholesale Market Making to Go Beyond Stocks

  • CEO sees currencies and Treasuries as areas of expansion
  • ‘I think it’s a good model,’ CEO Daniel Coleman says

KCG Holdings Inc., one of the top market makers who handle stock trades on behalf of retail brokerages, said the practice would work well in currencies, Treasuries and other assets.

“I think it’s a good model,” Coleman said during a conference call with analysts to discuss the company’s second-quarter earnings. “What I’d like to see over the next three to five years is this model expand beyond U.S. equity retail,” he said. “There could be specialists for executing other products, whether it’s FX or Treasuries or things beyond retail.”

Under wholesale market making arrangements, brokers ship their clients’ trades to companies like KCG that execute the orders. Sometimes, the brokers are paid a fee for doing so. The U.S. Justice Department and New York Attorney General are examining the market-making units of KCG and Citadel Securities, one of its top rivals, to assess whether customers have received the best prices for trades carried out by the firms, people familiar with the situation said two months ago.

The Department of Justice “has the right to look at anything they want,” Coleman said Thursday. KCG’s focus, he added, will be on “providing the very best execution, reviewing how we approach things, making sure we’re doing things the right way, and making sure we’re doing what we say we’re doing. And that’s really all we can do.”

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KCG’s shares fell 2.2 percent to $14.02 at 2:18 p.m. New York time following the second-quarter earnings report.

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