It has been a few months since KCG, the old Knight Capital Group, began life as a unit of Chicago-based GETCO Holding Co.
The name on office and business cards may have changed, but what has not been altered is KCG’s desire to be the top market maker and execution clearing firm for all things exchange traded funds. Enter Chris Hempstead, the former director of ETF execution at New York-based WallachBeth Capital.
Hempstead joined KCG’s Jersey City, New Jersey office in late October as the firm’s head of ETF sales. KCG spent about $15 million in severance to Hempstead’s predecessors, but he and the firm are looking forward, not back.
The old Knight Capital was once known as the dominant name in ETF clearing, execution and electronic trading services, functioning as the lead market maker for hundreds of U.S.-listed ETFs, big and small. Hempstead and the firm are committed to solidifying and bolstering that reputation.
“KCG as a firm is positioned to leverage and pivot off of ETFs,” said Hempstead in an interview from ETF Trends headquarters in Irvine, Calif.
Although Hempstead has only been on board with KCG a short time, he and the firm have quickly assembled what he calls an “ETF dream team” of sales staff and traders that have reputations for success up and down Wall Street.
“These guys know how to price ETFs and do it with a smile,” Hempstead said of his team. “We’re comfortable with our pricing. The most important ingredient in our client relationships is the trust that they are receiving a fair price for their trade implementation. Transparency on pricing goes a long way and our clients deserve it.”
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.