Knight Trading Rises as Q1 Beats Lowered Expectations

Knight Trading Group (Nasdaq: NITE) rose 92 U.S. cents to $16.36 early Wednesday after reporting quarterly results that were better than its previously lowered expectations.

The Jersey City, New Jersey-based online market maker and asset manager said that revenue for the first quarter ended March 31st fell to $225.65 million from $510.60 million a year earlier.

Pro forma net income plunged to $26.92 million, or 21 cents per share, from $135.73 million, or $1.07. Knight had predicted first-quarter earnings of 18 to 20 cents per share.

Chairman, president and chief executive officer Kenneth D. Pasternak said that the quarter saw "the most challenging trading environment Knight has experienced." The Nasdaq Composite Index slid 26 percent during the period, a "precipitous decline" that resulted in a pullback in trading by "self-directed" investors -- Knight's key clients, Pasternak said.

"Record levels of money flows into money market funds during the first two months of this year reflected the bias in self-directed investor sentiment towards cash rather than equities," said Pasternak. "Absent any economic catalyst, we believe the self-directed investor will continue to remain cautious as the market cycle bottoms out."

Knight's moves to diversify its revenue through broadening its client base and offering new products "have been important factors in partially offsetting the negative effects of the current market," according to Pasternak.

"Despite the recent cyclical downturn in the equity markets, we believe there is a powerful, ongoing secular trend towards self-directed investing as a means of wealth creation and management," said Pasternak.

"We believe that positioning Knight as a single point of entry for order flow across multiple product, client and geographic lines will enhance our ability to capture the benefits of this trend when the market cycle swings back into positive territory."