KCG launches “Catch” to enhance client algorithmic trading in Europe

KCG Holdings, Inc has today announced the launch of a European version of “Catch”, “a client execution algorithm designed to leverage smart logic, adaptability and advanced analytics to capture liquidity and achieve incremental micro alpha”, according to the press release. With a highly flexible participation range, between “passive, “neutral” or “aggressive”, clients can determine their urgency level for liquidity depending on their strategy.

Rob Crane, Head of Execution Services at KCG Europe, pointed to the nuanced fair value models, analytics processing power and optimized routing logic to navigate the EU marketplace that serves clients looking for minimal impact in their adaptive strategy. “It manages orders using the tactics a market maker would use – staying highly flexible and minding inventory and market conditions in real time”, he added.

KCG Holdings, Inc. is a result of a merger between Knight Capital Group and GETCO LLC in in July 8^th 2013, following a technological/managerial “breakdown” in which a test algorithm was connected to a production server in August 1^th 2012, causing a $440 million pre-tax losses in 45 minutes and a total of $462 million, four times its net income of 2011. Behind the glitch was an obsolete function, Power Peg, an untested piece of software that Knight Capital used on that day.

A technician forgot to copy the new Retail Liquidity Program (RLP) code to one of their automated routing systems for equity orders. The RLP activated “Power Peg” that was designed to move stock prices higher and lower, causing a major disruption in the prices of 148 companies listed at the NYSE. 212 parent orders sent millions of child orders and 4 million executions in 154 stocks.for over 397 million shares. In the aftermath, KCG was fined in $12 million by the SEC for ignoring dozens of error messages before executing unintended orders.

KCG stocks plunged 75% in two days, but four days after the incident the firm raised $400 million from a few investors headed by Jefferies, entering with the amount of $125 million in convertible securities. The deal proved to be profitable for Jefferies, privately owned by Leucadia, as the total of $254.5 million invested were recouped along the years through dividends and stock write-offs. The firm is no longer the majority shareholder after a $37 million sale of KCG Holdings, Inc. stock reported this year.

GETCO acquired 15.6 percent of Knight for a $400 million lifeline that saw the firm give up more than two-thirds of its equity, with a commitment from Jefferies to refinance KCG and GETCO debt. General Atlantic, owner of 25% of GETCO agreed to disburse an extra $55 million in equity investment, then totaling a $400 million since 2007.