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New high frequency trading firm cuts pay and headcount

Knight Capital Group

The European arm of KCG Group, which was formed by the merger of high frequency trading firm Getco and Knight Capital Group, is continuing to run at a loss and has cut pay and reduced headcount in its trading division.

KCG Europe posted a loss of $18.4m for the 12 months to 31 December 2014, according to new accounts posted on Companies House, having been $20.2m in the red for 2013.

The company was formed after the computer glitch that lost Knight Capital Group $440m in 30 minutes three years ago forced it to announce a merger with high-frequency trading firm Getco later that year. The merger was completed in July 2013.

Employees at Getco and Knight Capital have reportedly struggled to integrate into the new company and simmering tensions escalated to “an open rebellion”, according to an anonymous letter sent to KCG’s board last year.

The 2014 results are the first year that the 61 employees of Getco in London retained after the merger were transferred across to KCG Europe. Getco still lists accounts, but now only provides “IT services for co-location connectivity to the whole of KCG Group” and has no listed employees.

Including these staff, it had 152 employees at the end of last year, compared to 127 in 2013. However, it now employs 62 people in dealing and broking roles, a division which housed 75 people in 2013, and has 90 people working in administration roles.

The result is a drop in average pay per head. It paid $492.9k on average in 2013, a figure that fell to $392.7k last year. Overall, it paid out $59.7m in staff costs throughout 2014, compared to $62.6m in 2013, despite a larger headcount.

Meanwhile, its highest paid director received $994k in 2014 ($1.2m in 2013), but also received 750,000 restricted stock units, which were worth $8.7m in December 2014.

KCG Europe said that low volumes, combined with low market volatility have “adversely impacted revenue capture opportunities” and that it expected this to continue in the short to medium term. The company has been “right-sized to respond to this”.

Separately, XR Trading, the HFT firm that was bolstering junior headcount in 2014, has posted a loss of nearly $1.6m for last year, according to recently filed accounts. XR says that it has just three traders and one person in operations and IT. They shared $1.1m in salaries last year, or an average payment of $282k.

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