Getco's earnings mirror high-frequency industry
In several ways, Getgo is an iconic trading company, both a product and reflection of modern trading. The very existence of the market maker has been controversial for years. As a privately held company, however, the world never received detailed financial information about its operations--until now.
In preparation for its takeover of troubled Knight Capital, the Chicago-based firm has filed an S-4 with the SEC that notes operating results for the first three months of 2012. The results were not pretty, but they are entirely in keeping with the conventional wisdom about high frequency trading right now. Net profits for the first nine months of 2012 were $24.6 million, down from $134.8 million in the year-earlier period. Revenues fell 41 per cent over the same period, mainly due to a drop in domestic business. The filing shows that profits in 2008 at $430.4 million before steadily declining, notes the Financial Times.
These are tough times for high frequency traders across the board, as I've noted over on FierceFinanceIT. Most have responded by pushing into new markets abroad, which are becoming increasingly hospitable for high frequency trading, and into new asset classes.
In the case of Getco, those efforts are paying off. Asia revenues were strong, as were European revenues. But the biggest market is still the United States. At this point, you have to wonder if a big rebound is in the works. Equities would appear to be the place to be over the near term, and we might see a spike in volume, which would be good for high frequency traders across the board, especially if the spike was driven by retail volume.
- here's the article
Getco to buy Knight Capital for $1.8B