JERSEY CITY, N.J., Jan. 17 /PRNewswire/ -- Knight Trading Group, Inc. (Nasdaq: NITE) today reported results for the fourth quarter ended December 31, 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 and fixed income instruments 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 Capital Management subsidiary.

Fourth Quarter 2000 vs. Fourth Quarter 1999

    -- 11% decline in revenues               -- 13% growth in equity trades
                                                executed
    -- 42% decline in pro forma              -- 4% decline in equity shares
       net income                               traded

    2000 vs. 1999
    -- 40% growth in revenues                -- 57% growth in equity trades
                                                executed
    -- 37% growth in pro forma               -- 38% growth in equity shares
       net income                               traded

                        Fourth         Fourth            Year           Year
                        Quarter        Quarter
                         2000           1999             2000           1999

    Revenues ($)   251,327,596    281,698,232  1,256,919,577    896,575,443
    Pro forma
      net
      income ($)    35,254,120     60,278,554    259,011,602    188,459,815
    Pro forma
      diluted
      EPS ($)              .28            .47           2.04           1.50
    Equity trades
      executed      33,957,354     30,111,762    142,731,615     90,690,054
    Average daily
      equity
      trades          539,006         470,496        566,395        359,881
   Equity shares
      traded      24,797,134,511  25,946,697,929 112,052,786,805 81,010,256,250

Revenues for the fourth quarter of 2000 decreased 11% to $251.3 million, compared to $281.7 million for the fourth quarter of 1999. Net income for the fourth quarter of 2000 totaled $35.3 million, or $.28 per share on a diluted basis, a 41.5% decrease from $60.3 million, or $0.47 per share on a diluted basis for the pro forma period a year ago. The Company achieved pre-tax margins of 22.9% in the fourth quarter of 2000. Return on equity for the fourth quarter of 2000, stated on an annualized basis, was 18.5%.

Revenues and net income for the fourth quarter of 2000 increased 33.9% and 71.3%, respectively, from the third quarter of 2000. Equity trades executed and equity shares traded for the fourth quarter of 2000 increased 8% and 13%, respectively, from the third quarter of 2000.

The Company's options market-making business generated total net trading revenue of approximately $48.5 million in the fourth quarter, up 135% from the fourth quarter of 1999. Additionally, the Company's asset management business generated $10.9 million in asset management fees during the fourth quarter of 2000, up 159% from the same period a year ago.

"The markets reflected the uncertainty of investors during the fourth quarter, as evidenced by the significant declines across the major financial indices," said Kenneth D. Pasternak, Chairman, Chief Executive Officer and President of Knight Trading Group. "The Nasdaq closed its worst year ever, plunging 33% in the fourth quarter alone, and the New York Stock Exchange ended its worst year since 1981. The year closed out with a modest 6% decline in the Dow Jones Industrial Average versus the massive 39% decline in the Nasdaq Composite Index. Tax loss selling, portfolio repositioning and bargain hunting caused volumes on both exchanges to rebound to record levels in December. Investors, however, continued to seek refuge in larger cap, defensive stock issues as a safe haven from the volatility of technology and Internet stocks."

"We believe that the market correction kept many self-directed individual investors on the sidelines or in larger cap, defensive stock issues throughout the fourth quarter," continued Mr. Pasternak. "This mix of stocks -- for which Knight posts lower revenue capture per share -- negatively impacted our revenue for the quarter. These pressures were partially overcome by our unique trading methodology and our diverse client base and product offerings, resulting in a solid fourth quarter despite these challenging market conditions."

"During the fourth quarter, we continued to build the infrastructure for our global footprint," said Mr. Pasternak. "Expenses in Europe and Japan during the fourth quarter amounted to about $11 million (equivalent to about $.09 per share). We are also taking this opportunity to announce that the formation of our European Roundtable is nearing completion. Knight has received non-binding commitment letters from 24 potential Roundtable broker- dealer investors from 10 countries, and is confident of reaching its goal of raising over $70 million from investors. Based on the anticipated terms of the transaction, Knight will make a matching investment, and maintain an equity interest of approximately 70%. We anticipate finalizing the legal formalities with our European partners and hope to make a final announcement on closing this consortium soon."

"In spite of the extreme market conditions, this past year was marked by some remarkable accomplishments for Knight. The acquisition of our options market maker and asset management businesses, which was completed on January 12, 2000, has been highly accretive to earnings. Knight Financial Products has grown its options market share from less than 1% at the time of acquisition to over 3.5% by the end of the fiscal year. We now hold the number four market-making position in options, trading on all five leading options exchanges in the US, up from two at the time of acquisition."

"We are proud of our accomplishments over the last fiscal year and we begin 2001 poised to build our global operations and solidify our technology advantage," said Mr. Pasternak. "We are on the cusp of completing the formation of our European Roundtable. Once completed, Knight will be positioned as a first mover and leader in pan-European market-making solutions in the second largest market in the world. And we will continue to spend aggressively to enhance our technology, which is the clear differentiator in today's market and the key to our leadership position. Our strong balance sheet, superior technology and scalable, portable business model position us for leadership as the execution solution provider of choice for the global trading village."

Knight is the liquidity center that offers superior execution services to its broker-dealer and institutional clients in over-the-counter (OTC) and listed equity securities, and in equity options. In so doing, Knight helps its clients meet their fiduciary obligation of obtaining best execution for the securities orders that they place on behalf of their customers. Knight also maintains an asset management business for institutional investors and high net worth individuals through Deephaven Capital Management.

Knight has the power to commit capital for market orders, and also maintains one of the largest limit order books in the OTC market. It is one of the largest destinations for stock orders placed via the Internet. Knight traded 112 billion shares in the year 2000, a volume behind only those posted by Nasdaq and the New York Stock Exchange (NYSE). It is a charter member of Fortune magazine's "e-50 Stock Index," an elite collection of companies shaping the Internet-based economy. Knight also 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.

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 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 and Exchange Commission.

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


                            Three Months Ended               Year Ended
                               December 31,                 December 31,
                             2000          1999          2000          1999
    Revenues
      Net
        trading
        revenue       $229,145,837  $267,636,474 $1,157,515,897 $845,105,365
      Asset management
        fees            10,856,531     4,187,056   41,883,882    19,921,092
      Interest
        and dividends,
        net *            2,864,764     4,917,957   16,137,298    11,949,821
      Commissions and
        fees             7,225,816     4,751,156   32,157,736    16,439,090
      Investment income
        and other        1,234,648       205,589    9,224,764     3,160,075
      Total
         revenues      251,327,596   281,698,232 1,256,919,577  896,575,443

    Expenses
      Employee compensation
         and
         benefits       86,376,860    87,680,182  421,169,673   269,223,837
      Payments for
        order flow      39,738,337    39,845,973  174,645,439   138,696,691
      Execution and
         clearance
         fees           28,618,894    25,301,127  112,238,423    89,575,394
      Communications and
         data
         processing     10,737,004     5,349,191   33,025,036    18,944,361
      Depreciation and
        amortization     8,244,142     3,445,096   25,335,639    11,395,735
      Professional
         fees            5,043,352     2,784,890   21,526,495     7,889,198
      Occupancy and
         equipment
         rentals         5,929,931     3,239,480   18,741,887    10,706,397
      Business
         development     4,245,397     4,226,009   14,806,302    10,294,545
      Merger related costs      --     9,969,295           --     9,969,295
      Other              4,822,769     1,473,252   16,899,239     7,050,073
        Total
        expenses       193,756,686   183,314,495  838,388,133   573,745,526

    Income before income
     taxes and minority
      interest          57,570,910    98,383,737  418,531,444   322,829,917
    Income tax
       expense          22,975,979    35,827,729  159,446,394   111,545,941

    Net income before
      minority
      interest          34,594,931    62,556,008  259,085,050   211,283,976
    Minority interest
     in consolidated
    subsidiaries         (659,189)            --    (836,952)            --
    Net
       income          $35,254,120   $62,556,008 $259,922,002  $211,283,976
    Basic earnings
       per share             $0.29         $0.51        $2.12         $1.75
    Diluted earnings
       per share             $0.28         $0.49        $2.05         $1.68

    Pro forma adjustments:**
    Income before income
       taxes and minority
       interest                      $98,383,737 $418,531,444  $322,829,917
    Adjustment for
      pro forma employee
      compensation
      and benefits                     (889,015)    (267,109)   (7,579,827)
    Pro forma income
      before income taxes
      and minority
      interest                        97,494,722  418,264,335   315,250,090
    Pro forma income
       tax expense                    37,216,168  160,089,685   126,790,275
    Pro forma income
     before minority
      interest                        60,278,554  258,174,650   188,459,815
    Minority interest
      in consolidated
      subsidiaries                            --    (836,952)            --
    Pro forma
      net income                     $60,278,554 $259,011,602  $188,459,815
    Pro forma basic
      earnings per share                   $0.49        $2.11         $1.56
    Pro forma diluted
      earnings per
      share                                $0.47        $2.04         $1.50
    Shares used in the
      computation of basic
       earnings per
       share **        123,029,403   121,995,424  122,520,733   120,821,710
    Shares used in the
      computation of diluted
      earnings per
      share **         126,403,983   126,952,388  126,863,316   125,755,430

• Interest revenue is presented net of interest expense. Interest expense for the three months ended December 31, 2000 and 1999 was $13,992,183 and $4,533,117, respectively. Interest expense for the year ended December 31, 2000 and 1999 was $40,932,750 and $11,926,345, respectively.

• 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




                                                December 31,   December 31,
                                                        2000           1999

    ASSETS
    Cash and cash equivalents                   $364,057,534   $304,053,554
    Securities owned, at market value          1,799,966,679    910,232,916
    Receivable from clearing brokers             114,047,275    215,423,208
    Fixed assets and leasehold
      improvements at cost, less
      accumulated depreciation                    79,014,393     26,820,045
    Goodwill, less accumulated amortization       45,239,177     24,899,982
    Investments                                   64,917,975     40,408,554
    Other assets                                  54,166,139     18,447,547

    Total assets                              $2,521,409,172 $1,540,285,806

    LIABILITIES & STOCKHOLDERS' EQUITY
    Liabilities
      Securities sold, not yet
        purchased, at market value            $1,427,214,323   $720,919,013
      Securities sold under
        agreements to repurchase                          --     10,409,736
      Payable to clearing brokers                184,269,478    159,943,018
      Accrued compensation expense                62,444,645     57,234,608
      Accrued execution and clearance fees         6,092,754      8,371,056
      Accrued payments for order flow             11,635,069     13,978,854
      Accounts payable, accrued
        expenses and other liabilities            30,576,814     54,205,482
      Income taxes payable                         4,813,771     15,992,937
          Total liabilities                    1,727,046,854  1,041,054,704

    Minority interest in
       consolidated subsidiaries                  20,175,872             --

    Stockholders' equity
      Class A Common Shares                        1,232,908      1,221,215
      Additional paid-in capital                 317,999,321    300,355,094
      Retained earnings                          457,559,221    197,637,219
      Accumulated other
        comprehensive income(loss) -
        foreign currency translation
        adjustments, net of income taxes         (2,605,004)         17,574
          Total stockholders' equity             774,186,446    499,231,102


    Total liabilities and
      stockholders' equity                    $2,521,409,172 $1,540,285,806

SOURCE Knight Trading Group, Inc.

CONTACT: Robert Turner, Executive Vice President, Chief Financial Officer and Treasurer, 201-557-6845, Margaret Wyrwas, Vice President, Corporate Communications & Investor Relations, 201-557-6954, mwyrwas@knight-sec.com, Judy Pirro, Manager, Investor Relations, 201-356-1548 or judy_pirro@knight-sec.com, all of Knight Trading Group, Inc./