Institutional investors, such as pension plans, endowment funds and hedge funds, use firms such as KCG to move large blocks of ETF shares without upsetting existing market prices. Additionally, Hempstead and his team can help investors make a market in thinly traded ETFs without being pinched by wide bid/ask spreads.
Hempstead carried with him to KCG a reputation for transparency, something he told the firm had to be a cornerstone of its ETF operation prior to his joining. KCG seems to have taken that and the “pivot off ETFs” strategy to heart. Hempstead said the firm moved the ETF trading desk from the corner of its trading office to the middle, a sign of the growing importance of ETFs in KCG’s day-to-day operations.
One of the Hempstead’s best assets may be his pragmatic approach to ETF price and the battles within the war for client business.
He acknowledges his team will be challenged if it cannot deliver the best prices, but if that happens, “we’d go back to the drawing board and figure how to deliver what clients are demanding .”
Regarding his new post and team, Hempstead said: “We’re taking this from third gear to fifth gear. We’re stripping the paint down and the goal is to look back in a few years and say ‘this is a phenomenal product.’ We are fortunate to have assembled a veteran team of experts in the field .”
KCG makes markets in ETFs and other asset classes across 40 trading venues. The firm provides agency and principal services across all ETF sponsors while using internal technology to provide risk market, block access to exchange traded products of all stripes. KCG also offers creation and redemption services in the primary market.