Citigroup to acquire Knight’s derivatives markets business

Citigroup is set to acquire the derivatives markets business of New Jersey-based trade execution services firm Knight Trading in the fourth quarter.

Citigroup said it secured the deal with a purchase price of $225 million in cash, for which it will take on all the assets and operations that comprise the derivatives markets business, including electronic and floor-based market-making capabilities in listed equity and fixed-income options. Knight claims to cover nearly three quarters of all equity option order flow on most US options exchanges.

“The acquisition of Knight’s options business is consistent with our efforts to expand our derivatives market-making capabilities,” said James Forese, managing director and head of global equities at Citigroup.

Knight Trading is a provider of options execution and a specialist in about 500 option classes with three operating units, equity markets, derivatives markets and asset management. Knight is not selling its equity markets unit, which handles trading for Nasdaq over-the-counter stocks, nor its capital markets operation, which handles trading for the New York Stock Exchange and the American Stock Exchange securities.

“After a thorough review to explore the risks and rewards of both our derivatives markets business and the overall options industry, as well as the role of a derivatives business in Knight’s long-term strategy, management concluded that Knight’s strongest growth opportunities remain in our equity markets and asset management businesses, and that [the] derivatives market [business] has a better opportunity to reach its full potential as part of a larger company,” said Thomas Joyce, chief executive officer and president of Knight Trading. Proceeds from the sale will be used for a variety of corporate endeavors, including share repurchases, reinvestments in the business and acquisitions.

The deal is subject to regulatory approval.