File photo of traders at Knight Capital Group in Jersey City on January 14, 2009.
Knight Capital Group said it will buy the futures unit of Penson Worldwide Inc. for $5 million in cash as the brokerage and market maker seeks to expand in derivatives.
The acquisition of Penson Futures, which offers futures trading, clearing and custody, will close by the end of June, the Jersey City-based firm predicted in a statement today. About half of the $5 million covers exchange memberships and equipment. Knight will pay the remainder to Penson if the unit meets financial targets in the three years following the deal.
“Futures trading is increasingly moving toward an electronic, exchange-based model,” Tom Joyce, Knight’s chairman and chief executive officer, said in the statement. With the acquisition, Knight “fills a strategic gap in the client offering. We’re excited to extend our offering to include futures with a range of products from physical commodities to financial instruments.”
Penson Futures is a member of bourses and clearinghouses including the Chicago Board of Trade, the Chicago Mercantile Exchange, the Kansas City Board of Trade, London-based NYSE Euronext Liffe, the Minneapolis Grain Exchange, NYMEX, COMEX, ICE Futures US, ICE Clear Europe, One Chicago and LCH.Clearnet Group Ltd.
The unit services more than 60 brokers, high-frequency traders, non-clearing futures commission merchants, traders and exchange members, the company said in a separate statement.
Penson will transfer its customers’ futures positions, segregated funds, collateral, foreign-exchange positions and margin to Knight. The unit’s management and most of its employees will move to Knight.
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Knight is one of the largest wholesalers, a category of market makers that executes orders for individual investors sent by retail brokers. Other large wholesalers include UBS AG, Citigroup Inc., Citadel LLC and E*Trade Financial Corp.