GAAP loss includes $0.04 per diluted share of non-operating real estate and regulatory charges recorded within the company's two operating business segments, Equity Markets and Asset Management

Excluding charges, Equity Markets and Asset Management reported modest net operating losses in difficult market conditions

Corporate segment contributed earnings of $0.01 per diluted share, which included earnings of $0.06 per diluted share relating to investments in The Nasdaq Stock Market

JERSEY CITY, N.J., July 20 /PRNewswire-FirstCall/ -- Knight Capital Group, Inc. (Nasdaq: NITE) today reported a GAAP loss of $4.2 million for the second quarter of 2005, or a loss of $0.04 per diluted share.

For the second quarter of 2005, the company recorded charges of $4.2 million, net of tax, or $0.04 per diluted share, including $2.7 million, net of tax, relating to real estate charges and a writedown of fixed assets for its 525 Washington Boulevard facility; and $1.5 million, net of tax, relating to regulatory and related matters. Excluding these charges, the firm had a net operating loss from continuing operations of approximately $100,000 for the second quarter of 2005. Included within the net operating loss for the second quarter of 2005, the company recognized a gain of $6.1 million, net of tax, or $0.06 per diluted share, relating to its investments in The Nasdaq Stock Market, Inc.

For the second quarter of 2004, the company reported a GAAP loss of $47.9 million, or a loss of $0.42 per diluted share, which included a net loss from continuing operations of $51.6 million, or a loss of $0.46 per diluted share, and income from discontinued operations of $3.7 million, net of tax, or $0.03 per diluted share. During the second quarter of 2004, the company recorded charges for excess real estate capacity, writedowns of fixed assets and regulatory and related matters of $58.0 million, net of tax, or $0.51 per diluted share. Excluding these charges, the firm had operating earnings from continuing operations of $6.4 million, or $0.06 per diluted share, for the second quarter of 2004.

"Continuing operations" include the company's two operating business segments, Equity Markets and Asset Management. Continuing operations also include a Corporate segment, encompassing corporate investments and overhead expenses. Amounts reported as "discontinued operations" include the company's former Derivative Markets business segment, the sale of which was completed to Citigroup at the close of business on December 9, 2004.

Revenues for the second quarter of 2005 were $114.1 million, compared to $140.0 million from continuing operations for the second quarter of 2004.

"Knight had a rough start to the second quarter, but we worked hard to narrow losses through June and we continue to regain ground so far in July," said Thomas M. Joyce, Chairman and Chief Executive Officer of Knight Capital Group. "Miserable market conditions in April and May impacted profitability in both our Equity Markets and Asset Management businesses. During those challenging months, Knight management made some of its most far-reaching and considerable changes to date to the broker-dealer business as part of the ongoing effort to counteract revenue capture decline. The company dramatically increased its use of automation and instituted pricing structure adjustments that included a significant reduction in payment for order flow on Nasdaq, S&P 500, listed and Bulletin Board securities."

                                                     Q2 2005        Q2 2004

    Revenues ($)                                   114,096,109    140,036,160
    Net loss from continuing operations ($)         (4,210,577)   (51,597,576)
    Income from discontinued operations,
     net of tax ($)                                          -      3,736,622
    Net loss ($)                                    (4,210,577)   (47,860,954)
    Diluted EPS from continuing operations ($)           (0.04)         (0.46)
    Diluted EPS from discontinued operations ($)             -           0.03
    Diluted EPS ($)                                      (0.04)         (0.42)
    U.S. equity dollar value traded (in $ millions)    445,808        416,798
    U.S. equity trades executed (in thousands)          48,150         49,058
    Average daily U.S. equity trades (in thousands)        752            791
    Nasdaq and Listed equity shares traded
     (in millions)                                      25,363         28,936
    OTC Bulletin Board and Pink Sheet
     shares traded (in millions)                       154,050        376,142
    Average revenue capture per U.S.
     equity dollar value traded (bps)                      1.5            2.5
    Average month-end balance of assets
     under management ($ millions)                     3,268.5        2,895.1
    Quarterly fund return to investors*                   -1.3%           0.1%

    * Quarterly fund return represents the blended quarterly return across
      all assets under management in the Deephaven funds

                                                    YTD 2005       YTD 2004

    Revenues ($)                                   251,652,980    338,355,625
    Net income (loss) from continuing
     operations ($)                                  1,809,356    (25,619,746)
    (Loss) income from discontinued
     operations, net of tax ($)                       (265,927)     9,604,387
    Net income (loss) ($)                            1,543,429    (16,015,359)
    Diluted EPS from continuing operations ($)            0.02          (0.23)
    Diluted EPS from discontinued operations ($)             -           0.08
    Diluted EPS ($)                                       0.01          (0.14)
    U.S. equity dollar value traded (in $ millions)    916,483        921,413
    U.S. equity trades executed (in thousands)         100,999        108,650
    Average daily U.S. equity trades (in thousands)        808            876
    Nasdaq and Listed equity shares
     traded (in millions)                               54,462         69,863
    OTC Bulletin Board and Pink Sheet
     shares traded (in millions)                       449,849        696,708
    Average revenue capture per U.S.
     equity dollar value traded (bps)                      1.6            2.7
    Average month-end balance of assets
     under management ($ millions)                     3,375.3        2,432.6
    Year-to-date fund return to investors*                -0.2%           2.1%

    * Year-to-date fund return represents the blended return across all
      assets under management in the Deephaven funds


    Equity Markets

During the second quarter of 2005, the Equity Markets business segment generated total revenues of $98.5 million, compared to $131.1 million in the second quarter of 2004. In the second quarter of 2005, the Equity Markets business segment reported a net operating loss of $1.1 million, compared to net operating earnings of $9.4 million in the second quarter of 2004.

On June 16, 2005, the company announced the completion of its acquisition of the business of Direct Trading Institutional, Inc., a direct market access firm. In connection with this closing, the company made an initial cash payment of $40.0 million and recorded goodwill of $20.7 million and intangible assets of $20.0 million.

Asset Management

During the second quarter of 2005, the Asset Management business segment, Deephaven Capital Management, generated $8.0 million in asset management fees, compared to $8.1 million in the same period a year ago. In the second quarter of 2005, the Asset Management business segment reported a net operating loss of approximately $500,000, compared to net operating earnings of $1.3 million in the second quarter of 2004. Asset Management had approximately $3.4 billion under management at June 30, 2005, down slightly from the $3.5 billion under management at March 31, 2005, and up from $3.2 billion at June 30, 2004.

"As we start the third quarter, each business has established clear priorities and operational goals," Mr. Joyce said. "We continue to adapt and enhance our broker-dealer operations to meet new regulatory, market and competitive issues. Knight is very committed to remaining an industry leader serving broker-dealer clients. We believe the institutional equities business remains a growth opportunity, and we are confident that Knight's strength in listed market making and in small-to-mid-cap stocks will continue to drive our penetration of the institutional market. Moreover, as Knight integrates our new Electronic Services group, we'll see new opportunities to offer direct market access through Direct Trading Institutional, as well as ECN trade executions and other products and services. And finally, Deephaven continues to expand its offering by adding new single-strategy funds.

"In July we're experiencing an early summer rally, and the operating environment looks encouraging over the short term," Mr. Joyce added. "The strategies that Knight implemented in the second quarter, combined with somewhat improved market conditions, are having a positive impact on the profitability of our equity operations. Meanwhile, Deephaven started to see a rebound in returns in late May, which carried through the end of the second quarter. Our enthusiasm is tempered only by the need for greater economic recovery, including lower oil prices and stability in interest rates. We also can't rule out that the seasonal summer slowdown may simply arrive a little later than usual this year."

Corporate

In the second quarter of 2005, the Corporate segment reported net operating earnings of $1.5 million, compared to a net operating loss of $4.3 million in the second quarter of 2004.

The company's investment in the Deephaven funds lost $1.7 million, net of tax, during the second quarter of 2005, down from earnings of $300,000, net of tax, during the second quarter of 2004. At the end of the second quarter of 2005, the company had $227.2 million invested in the Deephaven funds. On July 1, 2005, Knight invested an additional $40 million in the Deephaven funds, bringing the total corporate investment to $267.2 million.

During the second quarter of 2005, the company recognized a gain of $6.1 million, net of tax, or $0.06 per diluted share, relating to its investments in The Nasdaq Stock Market, Inc.

The company had $794.9 million in stockholders' equity as of June 30, 2005, equivalent to a book value of $7.25 per diluted share. As of June 30, 2005, the company had $236.5 million in cash and cash equivalents and a $227.2 million investment in funds managed by Deephaven, its Asset Management business segment.

During the second quarter of 2005, the company repurchased 4.0 million shares for approximately $32.9 million under the company's $320 million stock repurchase program. To date, the company has repurchased 32.3 million shares for $252 million. The company cautions that there are no assurances that any further repurchases may actually occur.

On July 11, 2005, the company filed an SEC Form 8-K to announce its decision to correct its method of accounting for property lease transactions, and to restate its financial statements for the years ended December 31, 2002, 2003 and 2004, included in the company's 2004 Annual Report on Form 10-K. The interim financial statements included in the company's Form 10-Q for the quarterly period ended March 31, 2005 will also be restated. Accordingly, the unaudited financial data in this release reflects the restatement of these prior periods.

Copies of this earnings release and other information on the company can be obtained at the company's Web site, http://www.knight.com. The company will conduct its second quarter 2005 earnings conference call for analysts, investors and the media at 9:00 a.m. Eastern Daylight Time (EDT) today, July 20, 2005. 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 monthly volume statistics for June 2005 on its Web site before the start of trading today.

About Knight Capital Group

Knight is a leading provider of comprehensive trade execution and asset management services. Our Equity Markets business offers institutions and broker-dealers high quality trade execution and capital commitment across the depth and breadth of the equity market. Our Asset Management business, Deephaven Capital Management, is a market-neutral investment manager focused on delivering risk-adjusted returns with low volatility for institutions and high net worth individuals. Knight strives to be a valued partner by providing superior service and continually enhancing its offering to meet client needs. More information about Knight can be obtained at http://www.knight.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 including, without limitation, the risks and uncertainties detailed under the headings "Certain Factors Affecting Results of Operations" and "Risks Affecting our Business" in the Company's Annual Report on Form 10-K.

                          KNIGHT CAPITAL GROUP, INC.
                    CONSOLIDATED STATEMENTS OF OPERATIONS*
                                 (Unaudited)

                        For the three months ended  For the six months ended
                                 June 30,                   June 30,
                            2005          2004         2005          2004
    REVENUES
    Net trading revenue  $27,051,166   $61,234,847  $64,472,995  $161,962,704
    Commissions and fees  68,022,217    68,568,535  138,138,228   145,206,054
    Asset management
     fees                  8,036,861     8,106,756   25,917,529    22,038,887
    Interest and
     dividends, net        2,216,039       771,956    4,555,840     1,629,917
    Investment income
     and other             8,769,826     1,354,066   18,568,388     7,518,063
      Total revenues     114,096,109   140,036,160  251,652,980   338,355,625

    EXPENSES
    Employee compensation
     and benefits         48,193,801    53,250,738  105,051,243   118,354,526
    Execution and
     clearance fees       23,348,038    28,682,313   46,894,821    66,444,613
    Soft dollar and
     commission recapture
     expense              14,649,781    14,236,854   30,134,356    30,012,769
    Payments for order
     flow                  3,582,088     9,843,017   10,986,162    22,861,456
    Communications and
     data processing       8,151,261     6,962,602   15,965,223    13,716,379
    Depreciation and
     amortization          3,734,419     3,560,345    8,036,831     7,480,028
    Occupancy and
     equipment rentals     2,829,725     4,388,032    6,947,116     8,736,809
    Professional fees      4,550,021     3,950,860    8,331,745     7,307,132
    Business development   1,707,779     1,825,410    3,001,115     3,868,379
    Writedown of assets
     and lease loss
     accrual               4,545,895     2,623,986    4,545,895     2,623,986
    Regulatory charges
     and related matters   2,000,000    79,200,000    2,000,000    79,200,000
    Other                  3,425,759     2,189,722    6,079,506     4,938,852
      Total expenses     120,718,567   210,713,879  247,974,013   365,544,929

    (Loss) income from
     continuing
     operations before
     income taxes         (6,622,458)  (70,677,719)   3,678,967   (27,189,304)
    Income tax (benefit)
     expense              (2,411,881)  (19,080,143)   1,869,611    (1,569,558)

    Net (loss) income
     from continuing
     operations           (4,210,577)  (51,597,576)   1,809,356   (25,619,746)
    Income (loss) from
     discontinued
     operations, net of
     tax                         -       3,736,622     (265,927)    9,604,387
    Net (loss) income    $(4,210,577) $(47,860,954)  $1,543,429  $(16,015,359)

    Basic and diluted
     earnings per share
     from continuing
     operations               $(0.04)       $(0.46)       $0.02        $(0.23)
    Basic and diluted
     earnings per share
     from discontinued
     operations                   $-         $0.03           $-         $0.08
    Basic and diluted
     earnings per share       $(0.04)       $(0.42)       $0.01        $(0.14)

    Shares used in
     computation of
     basic earnings per
     share               104,335,490   112,971,307  106,584,672   113,222,334
    Shares used in
     computation of
     diluted earnings
     per share           104,335,490   112,971,307  109,579,944   113,222,334

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



                          KNIGHT CAPITAL GROUP, INC.
                CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                 (Unaudited)

                                             June 30, 2005   December 31, 2004
    ASSETS
    Cash and cash equivalents                 $236,483,470      $445,539,282
    Securities owned, held at clearing
     brokers, at market value                  368,690,244       254,473,209
    Receivable from brokers and dealers        791,509,982       244,881,065
    Investment in Deephaven sponsored
     funds                                     227,221,471       215,329,959
    Fixed assets and leasehold
     improvements at cost, less
     accumulated depreciation and
     amortization                               63,773,595        54,382,503
    Strategic investments                       65,865,078        29,266,796
    Goodwill                                    39,859,776        19,182,248
    Intangible assets, less accumulated
     amortization                               31,235,694        11,546,528
    Other assets                                74,255,144       119,418,725

    Total assets                            $1,898,894,454    $1,394,020,315

    LIABILITIES & STOCKHOLDERS' EQUITY
    Liabilities
    Securities sold, not yet purchased,
     at market value                          $321,559,724      $221,420,569
    Payable to brokers and dealers             644,999,033        88,480,788
    Accrued compensation expense                62,098,705       123,664,383
    Accrued expenses and other
     liabilities                                75,343,647       109,252,681

    Total liabilities                        1,104,001,109       542,818,421

    Stockholders' equity
    Class A common stock                         1,381,140         1,339,655
    Additional paid-in-capital                 463,490,454       427,451,712
    Retained earnings                          588,696,262       587,152,786
    Treasury stock, at cost                   (249,944,718)     (147,636,413)
    Accumulated other comprehensive
     income, net of tax                         21,672,747               -
    Unamortized stock-based compensation       (30,402,540)      (17,105,846)

    Total stockholders' equity                 794,893,345       851,201,894

    Total liabilities and stockholders'
     equity                                 $1,898,894,454    $1,394,020,315



                          KNIGHT CAPITAL GROUP, INC.
               RECONCILIATION OF GAAP TO NON-GAAP DISCLOSURES*
                  Amounts in millions, except per share data
                                 (Unaudited)

                                 For the three months ended June 30, 2005

                             Equity     Asset    Corporate Discontinued  Total
                             Markets  Management            Operations

    GAAP NET (LOSS) INCOME    $(3.7)   $(2.0)      $1.5         $-      $(4.2)
    Adjustments, net of tax:
    Writedown of assets and
     lease loss accrual         2.6        -          -          -        2.6
    Regulatory charges and
     related matters              -      1.5          -          -        1.5
    Net impact of adjustments   2.6      1.5          -          -        4.1
    NET OPERATING (LOSS) INCOME
     FROM CONTINUING
     OPERATIONS               $(1.1)   $(0.5)      $1.5         $-      $(0.1)

    GAAP NET (LOSS) INCOME
     PER DILUTED SHARE       $(0.04)  $(0.02)     $0.01         $-     $(0.04)
    Adjustments, net of tax:
    Writedown of assets and
     lease loss accrual        0.03        -          -          -       0.03
    Regulatory charges and
     related matters              -      0.01         -          -       0.01
    Net impact of adjustments  0.03      0.01         -          -       0.04
    NET OPERATING (LOSS) INCOME
     FROM CONTINUING OPERATIONS
     PER DILUTED SHARE       $(0.01)   $(0.01)    $0.01          $-    $(0.00)


                                 For the three months ended June 30, 2004

                             Equity     Asset    Corporate Discontinued  Total
                             Markets  Management            Operations

    GAAP NET (LOSS) INCOME   $(48.6)     $1.3     $(4.3)       $3.7    $(47.9)
    Adjustments, net of tax:
    Writedown of assets and
     lease loss accrual         1.5         -         -           -       1.5
    Regulatory charges and
     related matters           56.4         -         -           -      56.4
    (Income) from discontinued
     operations                   -         -         -        (3.7)     (3.7)
    Net impact of adjustments  58.0         -         -        (3.7)     54.2
    NET OPERATING INCOME
    (LOSS)FROM CONTINUING
     OPERATIONS                $9.4      $1.3     $(4.3)         $-      $6.4

    GAAP NET (LOSS) INCOME
     PER DILUTED SHARE       $(0.43)    $0.01    $(0.04)      $0.03    $(0.42)
    Adjustments, net of tax:
    Writedown of assets and
     lease loss accrual        0.01         -         -           -      0.01
    Regulatory charges and
     related matters           0.50         -         -           -      0.50
    (Income) from discontinued
     operations                   -         -         -       (0.03)    (0.03)
    Net impact of adjustments  0.51         -         -       (0.03)     0.48
    NET OPERATING INCOME (LOSS)
     FROM CONTINUING OPERATIONS
     PER DILUTED SHARE        $0.08     $0.01    $(0.04)         $-     $0.06

    * Totals may not add due to rounding.


                          KNIGHT CAPITAL GROUP, INC.
               RECONCILIATION OF GAAP TO NON-GAAP DISCLOSURES*
                  Amounts in millions, except per share data
                                 (Unaudited)

                                 For the six months ended June 30, 2005

                             Equity     Asset    Corporate Discontinued  Total
                             Markets  Management            Operations

    GAAP NET (LOSS) INCOME   $(10.3)    $0.2       $12.0      $(0.3)     $1.5
    Adjustments, net of tax:
    Writedown of assets and
     lease loss accrual         2.6        -           -          -       2.6
    Regulatory charges and
     related matters              -      1.5           -                  1.5
    Loss from discontinued
     operations                   -        -           -        0.3       0.3
    Net impact of adjustments   2.6      1.5           -        0.3       4.4
    NET OPERATING (LOSS)
     INCOME FROM CONTINUING
     OPERATIONS               $(7.7)    $1.7       $12.0         $-      $5.9




    GAAP NET (LOSS) INCOME
     PER DILUTED SHARE       $(0.09)   $0.00       $0.11     $(0.00)    $0.01
    Adjustments, net of tax:
    Writedown of assets and
     lease loss accrual        0.02        -           -          -      0.02
    Regulatory charges and
     related matters              -     0.01           -          -      0.01
    Loss from discontinued
     operations                   -        -           -       0.00      0.00
    Net impact of adjustments  0.02     0.01           -       0.00      0.04
    NET OPERATING (LOSS) INCOME
     FROM CONTINUING
     OPERATIONS PER
     DILUTED SHARE           $(0.07)   $0.02       $0.11         $-     $0.05


                                  For the six months ended June 30, 2004

                             Equity     Asset    Corporate Discontinued  Total
                             Markets  Management            Operations

    GAAP NET (LOSS)
     INCOME                  $(24.8)     $4.9      $(5.8)      $9.6    $(16.0)
    Adjustments, net of tax:
    Writedown of assets and
     lease loss accrual         1.5         -          -          -       1.5
    Regulatory charges and
     related matters           56.4         -          -          -      56.4
    (Income) from discontinued
     operations                   -         -          -       (9.6)     (9.6)
    Net impact of adjustments  58.0         -          -       (9.6)     48.4
    NET OPERATING INCOME (LOSS)
     FROM CONTINUING
     OPERATIONS               $33.2      $4.9      $(5.8)        $-     $32.3

    GAAP NET (LOSS) INCOME
     PER DILUTED SHARE       $(0.22)    $0.04     $(0.05)    $0.08     $(0.14)
    Adjustments, net of tax:
    Writedown of assets and
     lease loss accrual        0.01         -          -         -       0.01
    Regulatory charges and
     related matters           0.50         -          -         -       0.50
    (Income) from discontinued
     operations                   -         -          -     (0.08)     (0.08)
    Net impact of adjustments  0.51         -          -     (0.08)      0.43
    NET OPERATING INCOME (LOSS)
     FROM CONTINUING OPERATIONS
     PER DILUTED SHARE        $0.29     $0.04     $(0.05)       $-      $0.29

    * Totals may not add due to rounding.

CONTACT: Margaret Wyrwas, Senior Managing Director, Corporate Communications & Investor Relations, +1-201-557-6954, mwyrwas@knight.com, or Kara Fitzsimmons, Vice President, Corporate Communications, +1-201-356-1523, kfitzsimmons@knight.com, or Greta Morley, Vice President, Marketing Communications & Public Relations, +1-201-557-6948, gmorley@knight.com, or Molly McDowell, Analyst, Corporate Communications & Investor Relations, +1-201-356-1723, mmcdowell@knight.com, all of Knight Capital Group, Inc.