Will Knight Capital survive? And what about Hotspot FX?

After what the Wall Street Journal termed a “Knightmare” on Wall Street, market maker Knight Capital is desperately looking for outside financing to bolster its equity position after reporting $440 million of losses due to trading errors made yesterday. At the time of writing Knight Capital Group shares (NYSE:KCG) are down more than 50% today.

As far as the FX world is concerned, while Knight Capital’s business is mostly U.S. equities-related, the company also owns Hotspot FX, one of the leading Forex ECNs doing about $30 billion per day in FX volumes. Knight acquired Hotspot FX for $77 million in 2006.

Part of the problem Knight is facing is a crisis of confidence — in its ability to properly execute trades, as well as in its ability to survive. And that crisis is likely to spill over to all operating subsidiaries of Knight, including  Hotspot FX. One solution is to do a quick sale of Hotspot FX, which is not really essential to Knight’s main equities business, to raise cash quickly for Knight and to prevent Hotspot FX clients from leaving. With Thomson Reuters having recently paid $625 million to buy Hotspot FX rival FXall, we believe that others in the sector sch as ICAP-EBS and State Street’s Currenex, might take a close look at further consolidating the sector by picking up Hotspot FX.

Stay tuned, should be an interesting few days…

For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.

Read Also:

LeapRate is an independent research and advisory firm, specialized in covering the world of Forex trading. We are followed by hundreds of thousands of traders, investors and other FX industry participants via our website, Facebook, Twitter, LinkedIn, RSS and Email Newsletter. Copyright © All rights reserved Finaffiliates Limited Website:
https://finaffiliates.com CEO: Jason Hopgood Company number: 14540579 VAT identification number: GB 431522433

Location: Finaffiliates Limited, Lawrence House, 5 St. Andrews Hill, Norwich NR2 1AD, United Kingdom
Email: [email protected]

SUBSCRIBE TO OUR NEWSLETTER

IMPORTANT DISCLAIMERS

Foreign exchange trading comes with high level of risk. Before investing in foreign exchange, carefully consider your level of experience and risk appetite. CFDs are complex instruments and bring high risk of losing money because of the leverage they provide. No information or opinion contained on this site should be taken as investment advice, personal recommendation, or an offer of, or solicitation to buy or sell, any financial instruments. Past performance should not be considered evidence or guarantee for future performance. Between 74 and 89% of retail investors accounts lose money.