Organization and Description of the Business
Knight Capital Group, Inc. (collectively with its subsidiaries, the “Company”) has two operating business segments, Asset Management and
Global Markets, as well as a Corporate segment. As of September 1, 2008, the Company’s operating business segments comprised the following
operating subsidiaries:
Global Markets
Knight Equity Markets, L.P. (“KEM”) operates as a market-maker in over-the-counter (“OTC”) equity securities, primarily those traded in the
NASDAQ Stock Market and on the OTC Bulletin Board. KEM also operates the Company’s primary domestic institutional sales business. Donaldson
& Co., a division of KEM, offers soft dollar and commission recapture services. KEM is a broker-dealer registered with the SEC and is a
member of the NASDAQ Stock Exchange (“NASDAQ”), Financial Industry Regulatory Authority (“FINRA”), the International Securities Exchange,
LLC, the National Stock Exchange and the NFA.
Knight Capital Markets LLC (“KCM”) primarily operates as a market-maker in the over-the-counter market for New York Stock Exchange (“NYSE”)
and American Stock Exchange (“AMEX”) listed securities. KCM is a broker-dealer registered with the SEC and is a member of NASDAQ and FINRA.
Knight Equity Markets International Limited (“KEMIL”) is a U.K. registered broker-dealer that provides execution services for institutional
and broker-dealer clients in U.S., European and international equities. KEMIL is authorized and regulated by the FSA and is a member of the
London Stock Exchange, Deutsche Börse AG, Euronext N.V. (incorporating Euronext Amsterdam, Euronext Brussels, Euronext Lisbon and Euronext
Paris), Borsa Italiana, OMX (incorporating the Copenhagen Stock Exchange, Helsinki Stock Exchange and Stockholm Stock Exchange), Oslo Børs,
virt-x and Weiner Börse.
Direct Trading Institutional, L.P. (“Direct Trading”) provides institutions with direct market access trading through Knight Direct EMS™, an
advanced electronic platform. The business of Direct Trading was acquired by the Company in June 2005. Direct Trading is a broker-dealer
registered with the SEC and is a member of NASDAQ, FINRA and the NFA.
Hotspot FX, Inc. and its subsidiaries (“Hotspot”) provide institutions, dealers and retail clients with spot foreign exchange executions
through an advanced, fully electronic platform. Hotspot was acquired by the Company in April 2006. One Hotspot subsidiary is regulated by
the FSA, and another Hotspot subsidiary is an FCM registered with the CFTC and is a member of the NFA.
Knight BondPoint, Inc. (“Knight BondPoint”) (formerly known as ValuBond Securities, Inc.) provides electronic access and trade execution
products for the retail fixed income market. Knight BondPoint was acquired by the Company in October 2006. Knight BondPoint is a broker-dealer
registered with the SEC and is a member of FINRA and the Municipal Securities Rulemaking Board (“MSRB”).
Knight Libertas LLC (“Knight Libertas”) provides trade execution services and investment research across a broad range of fixed income
securities, including high-yield and high-grade corporate bonds, distressed debt, asset-backed and mortgage-backed securities, convertible
bonds and syndicated loans. Knight Libertas also provides capital markets services to growing companies in need of financing to support
expansion. Knight acquired Libertas Holdings in July 2008 and renamed it Knight Libertas LLC.
Asset Management
The Company owns a 51% stake in the parent company of Deephaven Capital Management LLC (“Deephaven”). Deephaven is the registered investment
adviser to and sponsor of the Deephaven investment funds (the “Deephaven Funds”). In addition to being registered as an Investment Adviser
with the U.S. Securities and Exchange Commission (“SEC”), Deephaven is also registered with the Commodity Futures Trading Commission (“CFTC”)
as a “commodity pool operator” and a “commodity trading adviser,” and is a member of the National Futures Association (“NFA”). Due to the
nature of Deephaven’s investor base, however, Deephaven is not registered as either a “Futures Commission Merchant” (“FCM”) or “Introducing
Broker” with the CFTC or NFA and is exempt from many of the CFTC and NFA regulations. Deephaven also has a U.K. registered investment adviser
subsidiary, which is regulated by the U.K. Financial Services Authority (“FSA”), and a Hong Kong registered investment adviser subsidiary,
which is regulated by the Hong Kong Securities and Futures Commission.
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