The Knight Capital Group is in talks to sell its futures brokerage unit with potential buyers, including Chicago-based R.J. O’Brien, people briefed on the matter told DealBook on Friday.
The deal discussions come amid heavy losses sustained by the Knight Capital after a computer glitch on Wednesday prompted the firm to make errant trades that cost it $440 million. Talks are ongoing and may still fall apart, these people cautioned.
Knight and its advisers have been holding discussions with a number of firms about their interest in buying pieces of its businesses. While the embattled trading firm has told trading customers that it has lined up financing to support the company through Friday, it is working to lock up a number of transactions or capital-raising efforts through the weekend.
Much of the futures division is comprised of operations that Knight purchased from Penson Worldwide only two months ago. Penson, a troubled securities firm, was seeking to sell off assets to raise capital. Regulators are also keeping a close eye on the futures unit, and examiners from the Commodity Futures Trading Commission are in the firm’s offices.
The oversight comes after two prominent futures brokerages have collapsed in the last year. MF Global, which filed for bankruptcy last October, misused about $1 billion dollars in customer money before it’s collapse. PFGBest, an Iowa-based firm, went under this summer after revelations that the chief executive of the firm had been misusing customer money.
R.J. O’Brien, which holds about $3.7 billion in client money, would be a natural buyer of the Knight’s futures business. The firm, based in Chicago, is one of the oldest futures clearing firms in the country.
Among the other companies that have been in contact about buying at least some parts of Knight include Citadel, Virtu Financial and Peak6, the people briefed on the matter said.
Representatives for Knight and Peak6 were not immediately available for comment. Citadel and Virtu declined to comment. In a statement, R.J. O’Brien said it “doesn’t comment on rumor or speculation.”