Virtu Financial Agrees to Purchase KCG Holdings

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Shares of KCG hit a record high of $19.73 in early trading on Thursday, while shares of Virtu were up about 8 percent.

The company earned $1.34 per share during the first three months of 2017, down from a $1.45 per share profit during the same quarter past year but still exceeding the Capital IQ consensus by $0.07 per share.

High-speed trading firm Virtu Financial Inc. reached a deal to acquire rival KCG Holdings Inc. for $1.4 billion in cash, a tie-up that would create an electronic trading giant responsible for around one-fifth of volume in US equities.

Virtu is expecting the deal to close during the third quarter of this year after receiving both regulatory and KCG shareholder approval. Virtu now employs 148 people while KCG employs 952. That fell at the top of the range that Virtu proposed last month, when it made an unsolicited offer to buy. Following the close of the transaction, Virtu Chief Executive Douglas Cifu will lead over the combined company. Low volatility in USA stocks, combined with rising costs for technology and market data, have squeezed the industry's profits.

For Virtu, the acquisition is expected to boost earnings by as much as 25% as it will provide additional sources of order flow for market making and will offer economies of scale and scope in infrastructure spending.

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