Stock Watch: Knight Trading Falls on Q3 Results

Knight Trading Group, Inc. (Nasdaq: NITE) was down 1 at 25 early Wednesday after the online brokerage said tough market conditions and costs associated with international expansion resulted in a 27 percent decline in pro forma net income for the third quarter.

Revenue for the quarter rose to $199.06 million from $163.83 million a year earlier. Pro forma net income, meanwhile, slipped to $20.58 million, or 16 cents per share, from $28.21 million, or 22 cents.

The company generated total net trading revenue of approximately $30.6 million in the third quarter, versus $18.7 million during the third quarter of 1999. Additionally, the company’s asset management business generated $9.8 million in fees during the third quarter of 2000, up 91 percent from the same period a year ago.

“The markets experienced a great deal of uncertainty during the third quarter, as evidenced by the recurring declines in Nasdaq and widespread low volatility,” said chairman, president and chief executive officer Kenneth D. Pasternak, noting that “this market environment caused self-directed individual investors to take a more conservative approach to investing.”

Pasternak added, “This market dynamic was accompanied by a rotation in our order flow mix away from growth and technology stocks toward a heavier concentration in large cap issues such as those in the Nasdaq 100 and on the NYSE — stocks for which Knight posts lower revenue capture per share. All of these factors hurt Knight’s profit performance during the third quarter.”

Pasternak also pointed out that Knight spent about $9 million, or 7 cents per share, during the quarter to bolster operations in Europe and establish a “global footprint.”

“We are working to support trading across all of Europe in all U.S. and European equity securities,” Pasternak said. “We believe that our aggressive approach to enhancing our European business will distance us even further from our competition in the region.”

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