ETF 'Godfather,' two others, to exit trading firm KCG

KCG Holdings Inc , the trading firm formed in July after Getco Holding Co's $1.4 billion takeover of Knight Capital Group, said on Wednesday that the head of its exchange-traded funds team and two other managers were leaving the company.

The managers leaving are Reggie Browne, Eric Lichtenstein and Darren Taube, a company spokeswoman said. The two sides had been unable to agree on the terms of new contracts, a person familiar with the situation said.

Browne, known as "the Godfather of ETFs," joined Knight along with Lichtenstein and Taube in 2009 from brokerage Newedge USA.

"Those three guys know more about ETF trading than most of us will ever learn," said Dave Nadig president of IndexUniverse LLC's ETF Analytics.

He said that, from a client relationship standpoint, the loss of Browne was a blow to KCG, because Browne has relationships with every issuer on Wall Street, all of the major ETF trading partners, hedge funds and large financial advisers.

"If you asked me yesterday, I would have said that Knight really has two things going for it, a talent edge and a technology edge, and now they have a technology edge," Nadig said.

Severance costs will total $15 million, and will be recognized in the third quarter, KCG said in a regulatory filing.

Joe Mazzella and John Dibacco oversee the ETF group on an interim basis, which KCG plans to further develop, the source said.

KCG is one of the biggest U.S. market makers in ETFs.

In August last year, a software problem at Knight led to millions of unintentional orders flooding into the market, leaving the firm with a huge position it had to unload at a loss of $461.1 million. Knight secured $400 million in rescue financing in exchange for a more than 70 percent stake in the company from a group of investors that included Chicago-based Getco and was led by Jefferies Group Inc. Jefferies later helped finance Getco's proposed acquisition of Knight.

(Reporting by John McCrank and Ashley Lau. Additional reporting by Jessica Toonkel.; Editing by Andrew Hay and Andre Grenon)