November 24, 2012 / 3:48 PM / in 8 years

Knight in talks for market-making unit sale: sources

A trader stands by the post that trades Knight Capital on the floor of the New York Stock Exchange August 3, 2012. REUTERS/Brendan McDermid

(Reuters) - Knight Capital Group Inc KCG.N is in talks about possibly selling its market-making operation, its largest and most profitable business, but it is not known if a deal will happen, a source said on Saturday.

The securities firm has been approached by at least two rivals about its market-making operation, which uses complicated computer models to match buy and sell orders in stocks and options, another source familiar with the matter said.

Knight’s board of directors is expected to get separate proposals next week for the market-making business from high-speed trading firms Getco LLC and Virtu Financial LLC, the Wall Street Journal reported, citing people who were briefed on the discussions. Other potential buyers also could approach the board about that business and perhaps others, it said.

Knight has virtually all of its customers back after a massive August trading glitch and could decide to keep the business, one of the sources familiar with the matter told Reuters.

Knight said it does not comment on rumors and speculation.

Getco and Virtu spokespeople declined comment on the report.

In October, Knight Capital posted a third-quarter loss of $389.9 million following a massive software glitch.

On August 1, Knight, one of the biggest executors of U.S. stock trades, went live with new software that had been improperly installed. The software conflicted with old code that was to have been deleted, unleashing a flood of orders to the New York Stock Exchange, and leaving Knight with a massive position it had to unload at a loss.

Reporting by John McCrank and Gregory Roumeliotis in New York; Writing by Brad Dorfman and Jessica Wohl in Chicago; Editing by Vicki Allen

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