What’s Afoot at Knight Capital

At the recent analyst and investor meeting, Knight Capital Group’s Chairman and CEO Tom Joyce reiterated the firm’s plan to restructure its institutional sales and trading, calling it a “reconfiguring based on current client behavior.” The news of the “reconfiguring” wasn’t a surprise, given declining sales and trading revenue from equities and growing operating expenses. Personnel cuts are expected through 2012.

For now, institutional sales and trading is being buoyed by U.S. listed derivatives, European institutional fixed income, and especially by its growing mortgage origination and securitization business through its subsidiary Urban Financial. So, it’s not expected that cuts will come on this side.

In July, Knight completed the acquisition of Urban Financial. At the time, the mortgage company and reverse mortgage originator had 109 employees. By June, Urban Financial’s headcount had jumped to 180.

The restructuring is set to be a major one, with plans to save about $40 to $50 million in operating expenses. Knight’s already discontinued the development of global program trading, as well as eliminated or reassigned institutional equities staff in Hong Kong. It also closed the Hong Kong office at 2 International Finance Centre. In addition to the workforce reduction, the Company cancelled more than 40 replacement hires.

In August, Knight Capital Group announced a workforce reduction of about 6 percent of staff worldwide, concentrated in full service sales and trading in equities and fixed income, as well as research, tech, operations and support functions. Knight had 1,391 full-time employees as of September 30, as compared to 1,465 as of June 30.