Knight Capital Group Inc. is the largest wholesale market maker in US
equity securities, with 19,000 stocks to its credit.
trade-execution services to 2,700 banks, financial institutions, brokers and
other customers around the world, including in Israel.
Capital executives recently visited Israel and spoke with Globes. Two of the
executives are Israeli: managing director for institutional sales Moti Ifergan
and China-based Tal Harpanas. They were joined by Joe Wald, who is responsible
for the specialized technology that focuses on algorithm- based trading
strategies and developing software for direct access to markets.
three were in Israel for marathon meetings with banks and local institutional
Knight is a leader in ADR (American Depository Receipt)
trading, with 17 percent of the market. The company also operates intensively in
European and Asian markets.
“The declared objective of the current visit
to Israel is widening and deepening the operations that have existed for about
the past 10 years with Israeli financial institutions,” Ifergan said. “This will
allow veteran and new institutions, including leading banks and Israeli
institutional investors, to receive brokerage services in foreign securities at
a different level, through a significant improvement in results that they will
be able to present to their end customers.”
“The Israeli market and its
leading players have a wonderful reputation around the world, and there is no
reason that they should not get the leading brokerage services in the world,” he
Knight’s ability to offer the highest level of liquidity in the
market, together with specialized algorithm-based technology whose compatibility
with market conditions and customer demands occupies 50 programmers, are what
allow it to reach optimal execution that saves customers lots of
“Knight’s systems know how to deal with large orders that
customers feed into the company’s algorithm-based trading systems,” Wald said,
“and they are broken up into smaller quantities whose execution is matched with
market conditions at any given time, and they drag out for a while: that way we
avoid unnecessary volatility in security pricing, and you avoid exposing the
position of the customer.”
“The cost of a securities transaction is made
up of external cost, which is the fee, and internal cost, which is connected to
the quality of the execution,” he said.
“Brokers are measured today by
customers on the degree of slippage, or in other words, how much the price of
the security will move as a result of the buy- or sellorder flow.”
operates with transparency, the executives said.
Due to systems that
identify the optimal opportunities, Knight’s average slippage is less than five
cents for every dollar traded, compared with an average of $0.15- $.40 among its
competitors, they said.
“The savings goes straight to the customer,
reduces transaction costs and contributes to improved returns – a central factor
for institutional players in the market, who try with all their might to beat
the market and provide better returns than competitors’ for customers,” Ifergan
Multiplying the cost difference by the number of transactions
carried out daily by Knight results in a huge number, the executives
That points to the effectiveness of execution that attracts
professional clients to Knight from across the global capital markets, including
banks, mutual funds, hedge funds, provident funds and pension funds, they
Recent years have seen a development of off-floor trading, and
today about 15% of securities trading is carried out through “dark pool”
activity, where large trades take place offexchange, so that the volume doesn’t
work against investors. There are about 30 dark pools in the US, alongside the
established exchanges, which are also increasing in number.
have expanded beyond the wellknown ones such as Nasdaq or the New York Stock
Exchange. Knight operates in all of them, so the broker is able to increase
returns for customers while maintaining anonymity.
Knight’s leadership in
ADR trading is very relevant to investors who are interested in trading shares
of Israeli companies on Wall Street, where most Israeli companies trade as ADRs,
the executives said. Many of them have low trading volume, and many investors
are prevented from investing in them to avoid getting stuck with inventory when
they want to exit a position, which would result in driving the share price
“Knight has the ability to supply much more liquidity than the
supply or demand listed on the screens,” Ifergan said. “If investors want to buy
or sell a block of shares... without moving the market too much, apparently
we’re the ones who can help them do it in the best way.”