JERSEY CITY, N.J., July 18 /PRNewswire/ --

Knight Trading Group, Inc. today reported results for the second quarter ended June 30, 2001.

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.

• Second Quarter 2001 vs. Second Quarter 2000
• 46% decline in revenues * 5% decline in equity trades executed
• 94% decline in net income * 58% increase in equity shares traded
• Second Quarter 2001 vs. First Quarter 2001
• 27% decline in revenues * 5% increase in equity trades executed
• 86% decline in net income * 29% increase in equity shares traded
• Six months ended 2001 vs. Six months ended 2000
• 52% decline in revenues * 20% decline in equity trades executed
• 85% decline in pro forma * 7% decline in equity shares traded net income

                                              Second Quarter Second Quarter
                                                        2001           2000

    Revenues ($)                                 165,806,564    307,127,951
    Net income ($)                                 3,803,014     67,484,894
    Diluted EPS ($)                                     0.03           0.53
    Equity trades executed                        31,804,054     33,285,417
    Average daily equity trades                      504,826        528,340
    Equity shares traded                      34,065,655,573 21,516,920,838


                                                         YTD            YTD
                                                        2001           2000

    Revenues ($)                                 391,453,690    817,726,988
    Pro forma net income ($)                      30,720,476    203,169,878
    Pro forma diluted EPS ($)                           0.24           1.60
    Equity trades executed                        61,981,353     77,354,858
    Average daily equity trades                      495,851        613,927
    Equity shares traded                      60,516,554,759 65,333,712,218

Revenues for the second quarter of 2001 declined 46% to $165.8 million, compared to $307.1 million for the second quarter of 2000. Net income for the second quarter of 2001 totaled $3.8 million, or $0.03 per share on a diluted basis, a 94% decrease from $67.5 million, or $0.53 per share on a diluted basis for the same period a year ago. The Company achieved pre-tax margins of 3.1% in the second quarter of 2001, down from 35.6% in the second quarter of 2000. Return on equity for the second quarter of 2001, stated on an annualized basis, was 1.8%. Costs related to international expansion efforts were $8.2 million, equivalent to $0.07 per share.

Non-operating charges in the second quarter were $13.1 million on a pre- tax basis, or $8.4 million on an after-tax basis, equivalent to $0.07 per share. Of these charges, $10 million was a non-recurring charge relating to an impaired investment in a non-public e-commerce company, $1.5 million was related to severance costs incurred during the second quarter and $1.6 million related to a write-down of exchange seats.

Revenues and net income for the second quarter of 2001 decreased 27% and 86%, respectively, from the first quarter of 2001. For the second quarter, equity trades executed increased 5% versus the first quarter of 2001. Equity shares traded for the second quarter of 2001 increased 29% from the first quarter of 2001.

The Company's options market maker generated total net trading revenue of approximately $27.0 million during the second quarter of 2001, versus $37.6 million during the second quarter of 2000. Additionally, the Company's asset management business generated $8.6 million in asset management fees during the second quarter of 2001, down 24% from $11.2 million in the same period a year ago.

The institution of a one-penny Minimum Price Variant (MPV) has introduced new challenges for participants in the securities marketplace. The one-penny MPV was instituted concurrently with the full implementation of decimalization for Nasdaq issues on April 9, 2001 and for NYSE- and Amex-listed issues on January 29, 2001. The one-penny MPV, instituted by the exchanges and Nasdaq market, is a separate issue from decimalization, which was an SEC mandated change.

''Knight was fully prepared from a systems and client product position for the impact of decimalization. This regulatory change was fully implemented on April 9th for all Nasdaq securities,'' stated Kenneth D. Pasternak, Chairman and Chief Executive Officer of Knight Trading Group. ''We knew the operating environment would be challenging under decimalization. However, we could not foresee the full magnitude of a concurrent, but separate, rule -- the implementation of a one-penny minimum price variant (MPV), which allowed for trading in increments as small as one cent.''

''To face this challenge, Knight is using the experience gained over the last 14 weeks to fine-tune our trading algorithms. This will ensure that our trading methodologies better reflect the dynamics of a one-penny MPV marketplace,'' continued Mr. Pasternak. ''In addition, consolidation in our industry and reduction in the depth of book have resulted in greater demand for Knight as a liquidity provider. Therefore, on July 1st we revised our rebate schedules (known as ''payment for order flow'') to clients and are considering the introduction of fees for certain transactions. These changes reflect better the value that Knight's liquidity provides to the marketplace, and should result in a more acceptable level of profitability to the benefit of the Company and our shareholders.''

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). For the second consecutive year, based on 1999 and 2000 fiscal year results, Knight was 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 by calling 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 and Exchange Commission.

                                              [Financial tables follow]

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

                                Three Months Ended         Six Months Ended
                                      June 30                    June 30
                              2001          2000         2001          2000
    Revenues
    Net trading
     revenue          $135,030,160  $282,515,465 $322,484,606  $769,293,569
    Asset management
     fees                8,595,133    11,241,256   21,315,169    21,014,845
    Interest and dividends,
     net                 8,708,576     4,111,692   14,017,890     7,619,109
    Commissions and
     fees               12,419,249     5,997,936   26,931,449    13,025,564
    Investment income
     and other           1,053,446     3,261,602    6,704,576     6,773,901
      Total revenues   165,806,564   307,127,951  391,453,690   817,726,988

    Expenses
    Employee compensation
     and benefits       57,104,741   102,286,239  136,808,600   277,485,029
    Payments for order
     flow               20,200,309    38,319,274   49,918,735    97,636,834
    Execution and clearance
     fees               30,095,990    28,917,311   60,145,045    59,139,599
    Communications and
     data processing    13,396,452     7,104,826   26,227,840    14,230,819
    Depreciation and
     amortization       10,368,150     5,501,436   20,590,730     9,716,399
    Professional fees    3,520,265     6,106,709    9,174,276    10,638,771
    Occupancy and equipment
     rentals             4,586,170     4,314,147    9,597,028     7,407,333
    Business development 4,104,472     2,884,409    7,474,230     8,123,102
    Other                4,269,219     2,302,611   10,203,757     6,908,372
    Loss on writedown of
     assets and
     investment and
     severance costs    13,096,513            --   13,096,513            --
      Total expenses   160,742,281   197,736,962  343,236,754   491,286,258

    Income before income
     taxes and minority
     interest            5,064,283   109,390,989   48,216,936   326,440,730
    Income tax expense   3,556,491    41,906,095   21,538,620   122,360,456

    Net income before
     minority interest   1,507,792    67,484,894   26,678,316   204,080,274

    Minority interest in
     consolidated
     subsidiaries      (2,295,222)            --  (4,042,160)            --

    Net income          $3,803,014   $67,484,894  $30,720,476  $204,080,274
    Basic earnings per
     share                   $0.03         $0.55        $0.25         $1.67
    Diluted earnings
     per share               $0.03         $0.53        $0.24         $1.61

    Pro forma adjustments:*
    Income before income taxes                                 $326,440,730
    Adjustment for pro forma
     employee compensation and
     benefits                                                     (267,109)

    Pro forma income before
     income taxes                                               326,173,621
    Pro forma income tax expense                                123,003,743
    Pro forma net income                                       $203,169,878

    Pro forma basic earnings per share                                $1.66
    Pro forma diluted earnings per share                              $1.60

    Shares used in the computation of
     basic earnings
     per share *       123,683,862   122,234,246  123,603,466   122,192,533
    Shares used in the computation
     of diluted earnings
     per share *       125,884,824   126,795,238  126,046,085   127,007,447

    *  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,
                                                        2001           2000
                                                 (unaudited)
    ASSETS
    Cash and cash equivalents                   $347,384,808   $364,057,534
    Securities owned, held at clearing
     broker, at market value                   1,643,644,013  1,799,966,679
    Receivable from clearing brokers             810,134,190    114,047,275
    Fixed assets and leasehold improvements at
     cost, less accumulated depreciation          90,261,326     79,014,393
    Goodwill, less accumulated amortization       41,820,295     45,239,177
    Investments                                   74,452,276     64,917,975
    Income taxes receivable                        6,472,465             --
    Other assets                                  58,795,028     54,166,139

    Total assets                              $3,072,964,401 $2,521,409,172

    LIABILITIES & STOCKHOLDERS' EQUITY
    Liabilities
     Securities sold, not yet purchased,
      at market value                         $1,867,452,000 $1,427,214,323
     Payable to clearing brokers                 278,976,772    184,269,478
     Accrued compensation expense                 46,474,033     62,444,645
     Accrued execution and clearance fees          5,965,621      6,092,754
     Accrued payments for order flow               4,374,269     11,635,069
     Accounts payable, accrued expenses
      and other liabilities                       18,831,743     30,576,814
     Income taxes payable                                 --      4,813,771
        Total liabilities                      2,222,074,438  1,727,046,854

    Minority interest in consolidated
     subsidiaries                                 27,047,171     20,175,872

    Stockholders' equity
     Class A Common Shares                         1,237,740      1,232,908
     Additional paid-in capital                  332,386,841    309,611,248
     Retained earnings                           496,657,258    465,947,294
     Unamortized stock- based compensation         (831,090)             --
     Accumulated other comprehensive income (loss) -
      foreign currency translation adjustments,
      net of tax                                 (5,607,957)    (2,605,004)

        Total stockholders' equity               823,842,792    774,186,446


    Total liabilities and stockholders'
     equity                                   $3,072,964,401 $2,521,409,172