KCG Buys Swedish Broker Neonet to Expand its Europe Business

  • Takeover of the execution specialist may complete this year
  • KCG didn’t disclose price of the the Neonet acquisition

Algorithmic trading firm and brokerage KCG Holdings Inc. is buying 20-year-old stockbroker Neonet Securities AB as the U.S. company seeks to expand its presence in Europe.

The deal is expected to close later this year, according to a statement on Wednesday. Stockholm-based Neonet provides algorithmic trading, smart order routing and sales trading in European equities. KCG didn’t disclose the price of the acquisition.

Europe’s securities regulators are putting a greater emphasis what’s known as “best execution,” requiring money managers to prove they’re getting a good deal for their clients when executing trades. KCG Europe has incorporated that regulatory drive into its business strategy.

“Neonet has a culture which is around technology and execution quality and obviously that fits very closely with what we’re trying to do,” Philip Allison, chief executive officer of KCG Europe Ltd., said in a phone interview. “It ticks all the boxes for us. In the mid-term, we think there will be some operational efficiency from having the two businesses together.”

While the Swedish acquisition could provide some flexibility for KCG to retain access to the European Union when the U.K. eventually leaves the bloc, Brexit wasn’t the reason for the purchase. Sweden is an EU member although it doesn’t use the common currency. KCG Europe had about 62 dealing and broking employees and 90 administrative staff in 2014, according to a filing with Companies House.

“It’s nice to have another office and a bit more optionality,” Allison said. “Assuming the deal closes with regulatory approval, it’s an interesting potential option, but I can’t say it was part of the overall story.”

Neonet is privately owned by a consortium including Hay Tor Capital LLP and KAS Bank NV. KCG was advised by Advokatfirman Vinge KB and Sullivan & Cromwell LLP. Neonet shareholders were advised by NovitasFTCL and Advokatfirman Delphi.

KCG is open to further acquisitions, though the opportunities are limited, Allison said.

“If we find the right opportunity, we wouldn’t rule it out,” he said.

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