Reggie Browne, perhaps the best-known market maker in the ETF industry, is leaving his job at Knight Capital Group this month, apparently due to what is currently being characterized as a contract dispute two months after his firm was acquired by Chicago-based high-frequency trading firm Getco, according to regulatory paperwork and comments from industry sources.
Browne will leave with his close colleagues Darren Taube and Eric Liechtenstein, and it wasn’t immediately clear where he or they might end up. An official at KCG Holdings, the company created by Getco's purchase of Knight, confirmed Browne’s plan to leave, citing an 8-K filing detailing severance pay Browne will receive after his last day on Sept. 13.
“Severance costs related to such separations will total in the aggregate $15 million and will be recognized in the third quarter of 2013,” according to the filing, which described the company’s intention to create a “smooth and orderly” transition.” Industry sources have said the negotiation over Browne's future was amicable, as was the decision to part ways.
Browne’s continued presence at New Jersey-based Knight had become something of an open question almost immediately after the Getco-Knight transaction was set in motion in December of last year.
Some sources in the securities-trading industry have said that the electronically driven trading culture at Getco represents something quite apart from what Browne and his team of ETF market makers had built up at Knight. That said Browne’s acumen was widely considered to be an important element of Getco’s interest in Knight.
Browne and his team have become known for keeping relatively illiquid ETFs trading with tight bid-ask spreads—a noteworthy reputation considering most of the 1,500 U.S.-listed ETFs are in that category. It's suspected that many if not all of his team of about 25 people may also leave.
Knight’s acquisition became a real possibility—if not an bona fide necessity—after a trading snafu in the summer of 2012 brought the firm to the very brink of bankruptcy in a matter of minutes. The episode provided yet another glimpse of how quickly and seriously things can go awry in a world of instantaneous, algorithmically driven trade.
Knight received an emergency infusion of more than $400 million in the form of a preferred securities sale just days after the episode, which was caused by a computer-trading program that executed in minutes a plethora of trades that were meant to take place over days, even weeks.
The Getco-Knight transaction that created KCG Holdings closed in July.
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