While Getco has proposed a $1.4bn (£874m) merger, Virtu Financial has offered to buy Knight for at least $1.1bn. The main attraction for both trading firms is Knight’s US market-making business, which uses computer models to match buy and sell orders in stocks and options and executes around 10 per cent of US equity trading volume.
Getco’s proposal effectively would see it bought by Knight, while Getco’s management, led by Chief Executive Daniel Coleman, would take control of the combined firm. The combined firm would be publicly traded, which would allow General Atlantic, which invested in Getco in 2007, to take the firm public. Getco also already has a 23.8 per cent stake in Knight.
Meanwhile Virtu has offered to take Knight private for at least $3 a share in cash. Virtu would look to sell off Knight’s businesses other than market-making. Getco joined with five other financial firms in early August to provide $400m in rescue funding to Knight after an errant trading programme drove a $461.1m loss.