On last year, the earnings of Getco LLC tumbled by 90% as the volatility of its shares evaporated. At the same time, the stock market volume experienced a fall as well. The net income declined to $16.2 million in 2011 from value of $162.7 million in the year before, as stated in the official statement released by the company. Incidentally, Getco agreed to take over Knight Capital Group Inc. as the market maker lost over $450 million after its computers generated a stream of erroneous orders in last August. The takeover deal was signed for a huge price of $1.4 billion. Reportedly, the 4th quarter profit of Knight tumbled by 84%.
While announcing the decision, in a joint statement, the companies stated that as the two companies have merged, the merged company will generate savings of at least $110 million every year through cost reductions. The expenses will be cut short by $20 million to $30 million during the very 1st year of the merger. By the end of the 3rd year of the merged company, it is expected that the annual savings of the same will increase to $90 million to $110 million.
Shares of the merged company will be listed under the New York Stock Exchange through a revised plan where existing stakeholders will receive one share of the combined company, if they exchange it with three shares of the separate companies. The original plan was of one share for one. This change will have no effect on the total amount paid to the shareholders of the Knight Capital and it is aimed to meet the requirement of New York Stock Exchange to have a price of $4 for each share at the time when it is listed. As of 12th April, each share of Knight Capital costs $3.74.
On the other hand, the Chicago Board Options Exchange Volatility Index, which is known as VIX as well, declined by 23% in 2012 and in March, it reached to a figure that’s the lowest in last 6 years. Incidentally, since 2009, every year, the average daily volume for stocks that are listed on the US exchange has tumbled. In 2012, it declined by 18% to a low of 6.42 billion shares. When it comes to 2009, the volume was of 9.77 billion and in 2013; it is at 6.30 billion till this date.