JERSEY CITY, N.J., July 19 /PRNewswire/ -- Knight Trading Group, Inc. (Nasdaq: NITE) today reported results for the second quarter ended June 30, 2000. Knight Trading Group is the leading market maker in equity securities listed on Nasdaq, the OTCBB of the National Association of Securities Dealers (NASD), and the over-the-counter market for New York Stock Exchange (NYSE) and American Stock Exchange (AMEX)-listed securities. Knight also is a leading market maker in options on individual equities, equity indices, fixed income instruments and certain commodities in the U.S. and Europe. The firm also maintains an asset management business for institutional investors and high net worth individuals through its Deephaven subsidiary.

 
    Second Quarter 2000 vs. Second Quarter 1999
    -- 23% growth in revenues      -- 55% growth in equity trades
                                          executed
    -- 16% growth in pro
       forma net income            --  1% growth in equity shares traded

    YTD 2000 vs. YTD 1999
    -- 81% growth in revenues      -- 93% growth in equity trades
                                          executed
    -- 103% growth in pro
       forma net income            -- 75% growth in equity shares traded


                                              Second Quarter Second Quarter
                                                        2000           1999


    Revenues ($)                                 313,517,756    254,172,478

    Pro forma
     net income ($)                               67,218,795     58,031,726

    Pro forma
     diluted EPS ($)                                     .53            .46

    Equity trades
     executed                                     33,285,417     21,448,630

    Average daily
     trades                                          528,340        340,454

    Equity shares
     traded                                 21,516,920,838 21,319,768,752

                                                         YTD            YTD

                                                        2000           1999

    Revenues ($)                                 828,282,022    457,612,643
    Pro forma
    net income ($)                               202,840,400     99,974,918
    Pro forma
    diluted EPS ($)                                     1.60            .80
    Equity trades
    executed                                      77,354,858     40,139,998
    Average daily
    trades                                           613,927        323,710
    Equity shares
    traded                                    65,333,712,218 37,262,921,041

Revenues for the second quarter of 2000 rose 23% to $313.5 million, compared to $254.2 million for the second quarter of 1999. Net income for the second quarter of 2000 totaled $67.2 million, or $.53 per share on a diluted basis, a 16% increase from $58.0 million, or $0.46 per share on a diluted basis for the pro forma period a year ago. The Company achieved pre-tax margins of 34.7% in the second quarter of 2000. Return on equity for the second quarter of 2000, stated on an annualized basis, was 39.7%.

Revenues and net income for the second quarter of 2000 decreased 39% and 50%, respectively, from the pro forma first quarter of 2000. Equity trades executed and equity shares traded for the second quarter of 2000 decreased 24% and 51%, respectively, from the first quarter of 2000, primarily due to decreased retail trading volume in the latter half of the second quarter.

The Company's options market-making business generated total net trading revenue of approximately $37.8 million, versus $20.6 million during the second quarter of 1999. Additionally, the Company's asset management business generated $10.9 million in asset management fees during the second quarter of 2000, up 71% from the same period a year ago.

"Knight focused its efforts during the second quarter on achieving its stated business objectives," said Kenneth D. Pasternak, the Chief Executive Officer and President of Knight Trading Group. "We made significant strides toward growing our client base, expanding our systems capacity and processing power, enhancing our execution standards, and building our business model in international markets. Indicative of our success during the past quarter is what we accomplished in the options industry. In less than six months since entering the business, we now are a major player in options trading. We have a presence on all five of the major U.S. options exchanges, and can handle options orders in more than 250 companies."

"On the international front, we made significant progress during the second quarter toward building our business model in Europe and Japan," continued Mr. Pasternak. "We have established our joint venture with Nikko Securities to provide wholesale market-making services in Japanese equity securities. In short, we are delivering -- faster than many thought we would -- on our promises to carve out a dominant role in options trading and to transport our business model to international markets."

"We also were successful in attracting order flow from a more diverse client base during the past quarter," said Mr. Pasternak. "Institutional order flow, for example, accounted for 44% of our equity trading revenues, versus 19% in the second quarter of 1999. We also implemented a new trading service in Nasdaq stocks that enhances our execution capabilities in the OTC market by offering more opportunities for price improvement through executions requiring no dealer intervention. The viability of the Nasdaq InterMarket, in which we are the largest trading firm, was reaffirmed when three electronic communications networks (ECNs) agreed to forge links to that market. All of these developments indicate that Knight is well positioned to become the liquidity center best equipped to provide superior order executions in OTC and listed securities transactions."

Knight plans to file promptly an SEC Registration Statement on Form S-3 covering 2.5 million shares of Knight Trading Group Class A Common Stock. The sellers on the Registration Statement consist of the five former members of Arbitrade Holdings. The Company makes this filing pursuant to the resale registration rights agreed to in the Agreement and Plan of Merger between the parties dated November 17, 1999, as filed with the SEC on a Current Report on Form 8-K on January 12, 2000. Knight intends to keep the Form S-3 effective through January 12, 2001, the first anniversary of the Company's Arbitrade acquisition.

Knight Trading Group, Inc., headquartered in Jersey City, NJ, is a liquidity center that seeks to empower investors by providing them with opportunities for price improvement, immediacy and enhanced liquidity in over-the-counter (OTC) and listed securities transactions. It has the power to commit capital for market orders, and it also maintains the largest limit order book in the OTC market. Knight traded 81 billion shares in 1999, a volume behind only those posted by Nasdaq and the New York Stock Exchange (NYSE). It also is one of the largest execution destinations for securities transactions placed via the Internet. Knight is a charter member of Fortune magazine's "e-50 Stock Index," an elite collection of companies that are shaping the new Internet-based economy. In addition, Knight, which has been in operations for fewer than five years, is ranked by Forbes magazine as one of the 500 most profitable public companies in the U.S. Ultimately, Knight plans to enable the global trading village to trade all types of equity securities and options at anytime, from anywhere in the world. More information about Knight can be obtained at http://www.knighttradinggroup.com or at http://www.knight-sec.com.

Copies of this earnings release and other information on the Company can be obtained via the Internet at http://www.knighttradinggroup.com or at http://www.knight-sec.com, or via the Company's toll-free investor information line at 1-877-INFO-NITE.

The matters described herein contain forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve a number of risks, uncertainties or other factors beyond the Company's control, which could cause actual results to differ materially from historical results, performance or other expectations and from any opinions or statements expressed with respect to future periods. These factors include, but are not limited to, the Company's ability to implement its growth strategies, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, intellectual property rights and other factors detailed in the Company's registration statement and periodic reports filed with the Securities & Exchange Commission.

                          KNIGHT TRADING GROUP, INC.
                      Consolidated Statements of Income
                                 (unaudited)


               Three Months Ended June 30,        Six Months Ended June 30,
                              2000          1999         2000          1999
    Revenues
    Net trading
     revenue          $283,041,696  $237,046,452 $770,086,203  $430,309,416
    Asset
     management
     fees               10,900,200     6,373,299   20,328,694     9,796,084
    Interest
     and dividends      12,142,855     5,093,387   22,494,593     8,728,374
    Commissions
     and fees            5,481,872     4,438,874   10,176,577     6,966,056
    Investment
     income
     and other           1,951,133     1,220,466    5,195,955     1,812,713
    Total revenues     313,517,756   254,172,478  828,282,022   457,612,643

    Expenses
    Employee
     compensation
     and benefits      102,275,294    77,141,196  277,415,954   139,355,694
    Payments
     for order
     flow               38,319,274    35,354,189   97,636,834    67,782,017
    Execution
     and clearance
     fees               27,646,413    22,027,402   57,403,931    41,742,573
    Interest             7,991,811     1,880,570   14,863,967     4,585,160
    Communications
     and data
     processing          7,103,218     4,225,659   14,235,689     8,356,358
    Professional
     fees                6,232,897     2,393,126   10,764,570     3,692,392
    Depreciation
     and
     amortization        5,495,985     2,765,027    9,697,134     4,905,124
    Occupancy
     and
     equipment
     rentals             4,305,870     2,575,176    7,380,002     4,498,557
    Business
     development         2,886,158     1,567,608    8,120,385     2,335,149
    Other                2,345,618     2,208,884    4,908,813     4,002,997
    Total
     expenses          204,602,538   152,138,837  502,427,279   281,256,021

    Income
     before
     income
     taxes             108,915,218   102,033,641  325,854,743   176,356,622
    Income
     tax
     expense            41,696,423    35,506,010  122,103,947    62,823,564

    Net income        $ 67,218,795  $ 66,527,631 $203,750,796  $113,533,058
    Basic
     earnings
     per share               $0.55         $0.55        $1.67         $0.95
    Diluted
     earnings
     per share               $0.53         $0.53        $1.60         $0.91

    Pro forma
     adjustments:*
    Income
     before
     income
     taxes                          $102,033,641 $325,854,743  $176,356,622
    Adjustment
     for pro
     forma employee
     compensation
     and benefits                    (2,713,499)    (267,109)   (4,419,564)
    Pro forma
     income
     before
     income
     taxes                            99,320,142  325,587,634  $171,937,058
    Pro forma
     income
     tax expense                      41,288,416  122,747,234    71,962,140
    Pro forma
     net income                      $58,031,726 $202,840,400   $99,974,918

    Pro forma
     basic
     earnings
     per share                             $0.48        $1.66         $0.83
    Pro forma
     diluted earnings
     per share                             $0.46        $1.60         $0.80
    Shares used
     in the
     computation
     of basic
     earnings
     per share *       122,234,246  121,421,678    122,192,533    119,774,228
    Shares used
     in the computation
     of diluted
     earnings
     per share *       126,795,238    126,672,844  127,007,447    124,647,369

• On January 12, 2000, Knight Trading Group, Inc. (the "Company") completed its merger with Arbitrade Holdings LLC ("Arbitrade"). The transaction was accounted for as a pooling of interests, and, as such, the historical financial statements have been restated to account for the merger on a retroactive basis. Pro forma adjustments for compensation and income taxes have been made to the historical financial statements of Arbitrade to adjust for partners' compensation paid as distributions of capital and income taxes, which were previously borne by the individual partners. The foregoing description of the Arbitrade transaction is a brief summary and is qualified in its entirety by reference to the Merger Agreement, a copy of which was filed as an exhibit to the Company's 8-K filed with the SEC on January 12, 2000. See also the Company's Report on Form 10-K for the year ended December 31, 1999.

                          KNIGHT TRADING GROUP, INC.
                Consolidated Statements of Financial Condition


                                                  June 30,    December 31,

                                                      2000           1999
                                                (unaudited)
    ASSETS
    Cash and
     cash equivalents                         $383,703,422     $304,053,554
    Securities owned,
     at market value                         1,428,211,228      910,232,916
    Receivable from
     clearing brokers                          317,772,210      215,423,208
    Fixed assets and
     leasehold improvements
     at cost,less accumulated
     depreciation                               50,201,063       26,820,045
    Goodwill, less accumulated
     amortization                               39,083,425       24,899,982
    Investments                                 57,866,551       40,408,554
    Other assets                                34,740,195       18,447,547

    Total assets                            $2,311,578,094   $1,540,285,806

    LIABILITIES & STOCKHOLDERS' EQUITY
    Liabilities
    Securities sold, not yet purchased,
     at market value                        $1,354,476,921     $720,919,013
    Securities sold under
     agreements to repurchase                           --       10,409,736
    Payable to clearing brokers                128,237,588      159,943,018
    Accrued compensation expense                64,749,345       57,234,608
    Accrued execution and clearance fees         9,187,248        8,371,056
    Accrued payments for order flow             10,021,939       13,978,854
    Accounts payable, accrued expenses
     and other liabilities                      19,298,383       54,205,482
    Income taxes payable                        19,513,907       15,992,937
    Total liabilities                        1,605,485,331    1,041,054,704

    Stockholders' equity
    Class A Common Shares                        1,222,740        1,221,215
    Additional paid-in capital                 303,464,434      300,355,094
    Retained earnings                          401,405,589      197,654,793
    Total stockholders' equity                 706,092,763      499,231,102


    Total liabilities
     and stockholders' equity               $2,311,578,094   $1,540,285,806

SOURCE Knight Trading Group, Inc.

CONTACT: Robert Turner, Executive Vice President, Chief Financial Officer and Treasurer, 201-557-6845, or Margaret Wyrwas, Vice President of Corporate Communications & Investor Relations, 201-557-6954, mwyrwas@knight-sec.com; or Chuck Dohrenwend, Manager of Corporate Communications, 201-356-1753, chuck_dohrenwend@knight-sec.com, all of Knight Trading Group, Inc./