Operating earnings were $0.09 per diluted share in second quarter 2004, excluding regulatory and real estate charges of $0.51 per diluted share For second quarter 2003, Knight reported GAAP earnings of $0.13 per diluted share, including loss from discontinued operations of $0.01 per share.

Despite unfavorable market conditions, all three business segments were profitable on an operating basis during second quarter 2004

JERSEY CITY, N.J., July 21 /PRNewswire-FirstCall/ -- Knight Trading Group, Inc. (Nasdaq: NITE) today reported a GAAP loss of $47.8 million for the second quarter of 2004, or a loss of $0.42 per diluted share. For the second quarter of 2003, the company reported GAAP earnings of $14.8 million, or $0.13 per diluted share.

As previously announced July 7, 2004, the company reached an agreement in principle with the staffs of the U.S. Securities and Exchange Commission and NASD to settle investigations in connection with specific institutional trade activity, conduct and supervision that occurred in 1999 through 2001; and books and records, document production and record-keeping deficiencies. During the second quarter, the company recorded $79.2 million in pre-tax charges for regulatory and related matters. In addition, the company recorded a pre-tax charge of $2.6 million in the second quarter relating to excess real estate capacity. In the aggregate, these charges were $58.0 million, net of tax, or $0.51 per diluted share. Excluding these charges, the firm had operating earnings of $10.1 million, or $0.09 per diluted share, for the second quarter of 2004.

The results for the second quarter of 2003 included a loss from discontinued operations of $1.1 million, net of tax, or $0.01 per diluted share, related to the closure of Knight Securities Japan. Excluding this item, the firm had earnings from continuing operations of $15.9 million, or $0.14 per diluted share, for the second quarter of 2003.

Revenues for the second quarter of 2004 were $176.0 million, compared to $159.4 million for the second quarter of 2003.

"Knight was successful at reaching profitability across all business lines despite the second-quarter market doldrums," said Thomas M. Joyce, Chief Executive Officer and President of Knight Trading Group. "The company remains the market leader for small- and mid-cap equities, and we continue to see success in our growing institutional business. Institutions may be trading less overall during this low part of the market cycle, but Knight has not pulled back on the personnel investments and sales and marketing efforts that are helping us develop and expand our relationships. We're pleased with the solid, profitable performance of our options business during the quarter in the face of options market challenges. And finally, Deephaven was able to both raise assets to greater than $3 billion at the end of June and produce fund returns that were in line with its peer group."

                                                   Q2 2004           Q2 2003

    Revenues ($)                               175,966,642       159,383,353
    Net (loss)/income from continuing
     operations ($)                            (47,846,062)       15,859,342
    Loss from discontinued operations,
     net of tax  ($)                                    --        (1,068,366)
    Net (loss)/income ($)                      (47,846,062)       14,790,976
    Diluted EPS from continuing operations ($)       (0.42)             0.14
    Diluted EPS from discontinued operations ($)        --             (0.01)
    Diluted EPS ($)                                  (0.42)             0.13
    U.S. equity dollar value traded
     (in $ millions)                               416,798           385,474
    U.S. equity trades executed (in thousands)      49,058            47,057
    Average daily U.S. equity trades (in
     thousands)                                        791               747
    Nasdaq and Listed equity shares
     traded (in millions)                           28,936            37,336
    OTC Bulletin Board and Pink Sheet
     shares traded (in millions)                   376,153            47,066
    U.S. options contracts traded (in thousands)    20,763            16,016


                                                  YTD 2004          YTD 2003

    Revenues ($)                               415,810,231       285,719,181
    Net (loss)/income from continuing
     operations ($)                            (16,031,607)        7,079,940
    Loss from discontinued operations,
     net of tax ($)                                     --        (2,124,297)
    Net (loss)/income ($)                      (16,031,607)        4,955,643
    Diluted EPS from continuing operations ($)       (0.14)             0.06
    Diluted EPS from discontinued operations ($)        --             (0.02)
    Diluted EPS ($)                                  (0.14)             0.04
    U.S. equity dollar value traded (in $
     millions)                                     921,413           660,139
    U.S. equity trades executed (in thousands)     108,650            81,335
    Average daily U.S. equity trades (in
     thousands)                                        876               656
    Nasdaq and Listed equity shares
     traded (in millions)                           69,863            63,927
    OTC Bulletin Board and Pink Sheet
     shares traded (in millions)                   696,708            87,066
    U.S. options contracts traded (in
     thousands)                                     42,292            28,892

Equity Markets During the second quarter of 2004, the Equity Markets business segment, which principally consists of domestic equity market-making and institutional sales operations, generated total revenues of $127.3 million versus $108.1 million during the second quarter of 2003.

Derivative Markets

During the second quarter of 2004, the company's Derivative Markets business segment, which principally consists of options market-making and option specialist operations, generated total revenues of $39.1 million versus $37.4 million during the second quarter of 2003.

Asset Management

The company's Asset Management business segment generated $8.1 million in asset management fees during the second quarter of 2004, compared to $9.8 million in the same period a year ago. The decrease reflects lower returns, but higher assets under management. Asset Management had approximately $3.2 billion under management at June 30, 2004 versus $1.3 billion at June 30, 2003. The company earned $490,000 during the second quarter of 2004 on its investment in the Deephaven funds, down from $3.9 million in the second quarter of 2003.

Knight Trading Group had 942 employees at the end of the second quarter 2004, compared to 939 at the end of 2003.

"Market conditions deteriorated with the passing of each month in the second quarter, and the near term does not seem to hold much promise for the higher volume and volatility that creates strong trading opportunities for Knight," Mr. Joyce said. "Like others in the financial services industry, we are looking toward the post-election period as the time when, traditionally, investors shake off their uncertainty and take a fresh look at equities. We can't predict when equity market conditions will improve. But we can maintain a long-term strategy, continue to operate Knight's businesses profitably, and position ourselves for the inevitable market rebound."

Liquidity and Stock Repurchase Plan

The company had $773.2 million in stockholders' equity as of June 30, 2004, equivalent to a book value of $6.67 per share. As of June 30, 2004, the company had $223.6 million in cash and cash equivalents and a $207.9 million investment in funds managed by its Deephaven subsidiary.

At its April 20, 2004 meeting, the Board of Directors authorized a $15 million increase in the size of the company's stock repurchase program to $110 million from $95 million. During the second quarter of 2004, the company repurchased 824,900 shares. To date, the company has repurchased 15,641,800 shares for $90.4 million under the program. The company cautions that there are no assurances that any further repurchases may actually occur.

Knight Trading Group had approximately 116.0 million shares of common stock outstanding as of June 30, 2004.

Copies of this earnings release and other information on the company can be obtained via the Internet at the company's Web site, or by calling the company's toll-free investor information line at 1-877-INFO-NITE. The company will conduct its second quarter earnings conference call for analysts, investors and the media at 9:00 a.m. Eastern Daylight Time (EDT) today, July 21, 2004. The conference call will be Webcast live at 9:00 a.m. (EDT) for all investors and interested parties on Knight's Web site. In addition, the company will release its volume statistics for June 2004 before the start of trading today on Knight's Web site.

Knight is focused on meeting the needs of institutional and broker-dealer clients by providing comprehensive trade execution services in equities and derivatives. A leading execution specialist, Knight offers capital commitment and access to a deep pool of liquidity across the depth and breadth of the equity market. Knight also operates an asset management business for institutions and high net worth individuals. To be a valued partner, Knight strives to provide superior client service and will continue to tailor its offering to meet the needs of its clients. More information about Knight can be obtained at http://www.knighttradinggroup.com.

Presentation of Information in this Press Release

In an effort to provide investors with additional information regarding the Company's results as determined by generally accepted accounting principles (GAAP), the Company also discloses certain non-GAAP information which management believes provides useful information to investors. Within this press release, the Company has disclosed its net income (loss) amounts for certain reporting periods before charges, writedowns and discontinued operations to assist the reader in understanding the impact of these charges, writedowns and discontinued operations on the Company's financial results, thereby facilitating more useful period-to-period comparisons of the Company's businesses.

Certain statements contained herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates and projections about the Company's industry, management's beliefs and certain assumptions made by management. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Since such statements involve risks and uncertainties, the actual results and performance of the Company may turn out to be materially different from the results expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Unless otherwise required by law, the Company also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made herein; however, readers should carefully review reports or documents the Company files from time to time with the Securities and Exchange Commission.

    KNIGHT TRADING GROUP, INC.
    CONSOLIDATED STATEMENTS OF OPERATIONS*
    (Unaudited)
                         For the three months ended   For the six months ended
                                    June 30,                   June 30,
                               2004          2003          2004          2003
    REVENUES
    Net trading
     revenue            $89,730,381  $100,980,052  $226,800,570  $171,168,255
    Commissions and
     fees                78,246,615    42,875,984   163,619,252    75,569,624
    Asset management
     fees                 8,106,756     9,766,106    22,038,887    23,991,827
    Interest and
     dividends, net      (1,477,813)    1,236,869    (4,335,948)    3,007,231
    Investment income
     and other            1,360,703     4,524,342     7,687,470    11,982,244
      Total revenues    175,966,642   159,383,353   415,810,231   285,719,181

    EXPENSES
    Employee
     compensation and
     benefits            65,750,925    61,441,064   145,599,876   115,459,037
    Execution and
     clearance fees      37,087,489    30,644,548    81,379,819    59,862,172
    Payments for order
     flow                15,348,457    11,269,288    34,859,953    22,182,079
    Soft dollar and
     commission
     recapture expense   14,236,854     1,607,847    30,012,769     2,275,321
    Communications and
     data processing      7,742,138     8,002,990    15,519,563    16,737,296
    Depreciation and
     amortization         4,924,095     7,395,158    10,715,471    15,510,796
    Occupancy and
     equipment rentals    4,738,800     4,902,294     9,559,976     9,337,926
    Professional fees     4,205,807     3,783,242     7,796,686     7,575,406
    Business
     development          1,956,727     1,880,747     4,099,524     3,830,652
    Writedown of
     assets and lease
     loss accrual         2,623,986            --     2,623,986    17,412,066
    Regulatory charges
     and related
     matters             79,200,000            --    79,200,000            --
    Other                 2,436,711     2,045,884     5,398,643     4,710,440
      Total expenses    240,251,989   132,973,062   426,766,266   274,893,191

    (Loss)/Income
     before income
     taxes and
     discontinued
     operations         (64,285,347)   26,410,291   (10,956,035)   10,825,990
    Income tax
     (benefit)/expense  (16,439,285)   10,550,949     5,075,572     3,746,050

    Net (loss)/income
     from continuing
     operations         (47,846,062)   15,859,342   (16,031,607)    7,079,940
    Loss from
     discontinued
     operations, net
     of tax                      --    (1,068,366)           --    (2,124,297)
    Net (loss)/income  $(47,846,062)  $14,790,976  $(16,031,607)   $4,955,643

    Basic and diluted
     earnings per
     share from
     continuing
     operations              $(0.42)        $0.14        $(0.14)        $0.06
    Basic and diluted
     earnings per
     share from
     discontinued
     operations                $ --        $(0.01)         $ --        $(0.02)
    Basic and diluted
     earnings per
     share                   $(0.42)        $0.13        $(0.14)        $0.04

    Shares used in
     computation of
     basic earnings
     per share          112,971,307   110,605,879   113,222,334   112,318,599
    Shares used in
     computation of
     diluted earnings
     per share          112,971,307   113,616,863   113,222,334   115,006,879

    * Certain prior period amounts have been reclassified to conform to the
      current year presentation.


    KNIGHT TRADING GROUP, INC.
    CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                                             June 30, 2004 December 31, 2003
    ASSETS
      Cash and cash equivalents               $223,560,628      $262,200,309
      Securities owned, held at clearing
       brokers, at market value              3,351,750,964     3,025,120,511
      Receivable from brokers and dealers      504,031,170       269,815,897
      Investment in Deephaven sponsored funds  207,899,205       197,605,068
      Fixed assets and leasehold improvements
       at cost, less accumulated depreciation
       and amortization                         38,658,542        37,557,829
      Strategic investments                     25,922,073        20,516,876
      Goodwill                                  23,626,692        21,109,518
      Intangible assets, less accumulated
       amortization                             13,496,009        14,696,175
      Other assets                             142,892,410       109,196,325

        Total assets                        $4,531,837,693    $3,957,818,508

    LIABILITIES & STOCKHOLDERS' EQUITY
    Liabilities
      Securities sold, not yet purchased,
       at market value                      $2,593,811,020    $2,658,090,718
      Payable to brokers and dealers           919,642,804       313,744,175
      Accrued compensation expense              89,195,314       116,668,586
      Accounts payable, accrued expenses
       and other liabilities                   155,997,181        79,183,251

        Total liabilities                    3,758,646,319     3,167,686,730

    Stockholders' equity
      Class A common shares                      1,304,720         1,281,871
      Additional paid-in-capital               398,293,169       370,897,405
      Retained earnings                        483,025,149       499,056,756
      Treasury stock, at cost                  (85,181,965)      (68,795,258)
      Unamortized stock-based compensation     (24,249,699)      (12,308,996)

        Total stockholders' equity             773,191,374       790,131,778

        Total liabilities and stockholders'
         equity                             $4,531,837,693    $3,957,818,508


    KNIGHT TRADING GROUP, INC.
    RECONCILIATION OF GAAP TO NON-GAAP DISCLOSURES

                        For the three months ended    For the six months ended
                                     June 30,                   June 30,
                                 2004         2003          2004         2003

    GAAP NET(LOSS)
     INCOME              $(47,846,062) $14,790,976  $(16,031,607)  $4,955,643
    Adjustments, net of
     tax:
      Writedown of assets
       and lease loss
       accrual              1,521,912           --     1,521,912   10,274,827
      Regulatory charges
       and related matters 56,436,000           --    56,436,000           --
      Loss from
       discontinued
       operations                  --    1,068,366            --    2,124,297
      Net impact of
       writedowns and
       charges             57,957,912    1,068,366    57,957,912   12,399,124
    EARNINGS FROM
     OPERATIONS           $10,111,850  $15,859,342   $41,926,305  $17,354,767

    GAAP NET (LOSS)
     INCOME PER DILUTED
     SHARE                     $(0.42)       $0.13        $(0.14)       $0.04
    Adjustments, net of
     tax:
      Writedown of assets
       and lease loss
       accrual                   0.01           --          0.01         0.09
      Regulatory charges
       and related matters       0.50           --          0.50           --
      Loss from discontinued
       operations                  --         0.01            --         0.02
      Net impact of
       writedowns and charges    0.51         0.01          0.51         0.11
    EARNINGS FROM
     OPERATIONS PER
      DILUTED SHARE             $0.09        $0.14         $0.37        $0.15

SOURCE Knight Trading Group, Inc. -0- 07/21/2004 /CONTACT: Margaret Wyrwas, Senior Managing Director, Corporate Communications & Investor Relations, +1-201-557-6954, mwyrwas@knighttrading.com, or Kara Fitzsimmons, Vice President, Corporate Communications, +1-201-356-1523, kfitzsimmons@knighttrading.com, or Judy Pirro, Vice President, Investor & Shareholder Relations, +1-201-356-1548, jpirro@knighttrading.com, or Greta Morley, Assistant Vice President, Marketing Communications & Public Relations, +1-201-557-6948, gmorley@knighttrading.com, all of Knight Trading Group, Inc./ /Web site: http://www.knighttradinggroup.com / (NITE)