Nite @ 40? Makes sense, but you could have bought @ 35 before the announcement got you momentum players back in.
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Jersey City, New Jersey, Aug. 26 (Bloomberg) -- Knight/Trimark Group Inc., the biggest Nasdaq market maker, said it will clear and settle all its securities transactions through Merrill Lynch & Co. instead of PaineWebber Inc.
Jersey City, New Jersey-based Knight said it will give its business to Merrill's Broadcort Capital Corp. starting in mid- October. The 4-year-old Knight had been using PaineWebber's Correspondent Services Corp.
The agreement ties Merrill, the biggest brokerage and a new entrant to Internet stock trading, to Knight, which has seen trades more than double in the past year because of the growth in online trading.
''Merrill helped take Knight public, so there's a long- standing relationship, and they're just hitching themselves together as closely as possible,'' said Amar Mehta, an analyst with CIBC Oppenheimer Inc.
Merrill Lynch will probably use Knight as the final destination for trades made by Merrill's Internet brokerage customers, he said. Still, it's unlikely Merrill will buy Knight outright because ''they're having too much fun to sell,'' said Mehta.
Knight shares surged 6, or 18 percent, to 40 on volume of 20 million shares, almost quadruple its three-month daily average. Merrill rose 1 1/8 to 79 5/8. PaineWebber fell 3/4 to 42 3/16.
Internet Growth
''We think it's best that we operate as an independent company,'' said Kenneth D. Pasternak, Knight's president and chief executive. ''This is a commercial relationship, nothing more, nothing less.''
Knight's Nasdaq market maker business executed more than 15.4 million trades in the second quarter, with about half of the trades originating at Internet brokerages. Merrill will let all of its customers make trades over the Internet by year-end.
Knight's shares surged because investors expect Merrill may one day send ''substantial'' order flow Knight's way, said Scott Appleby, an analyst with BancBoston Robertson Stephens. In the near term, Knight will save $1.5 million in the fourth quarter, equal to 1 cent per share in additional earnings, by using Merrill to clear its trades, he said.
''We have no agreement'' for Merrill to send online orders to Knight, Pasternak said. ''We are optimistic we can earn the right to be the destination for some of their order flow.''
Merrill can clear options and international trades, two areas where Knight is seeking to expand, Pasternak said. ''It wasn't a dissatisfaction with PaineWebber; it was part of a periodic evaluation of where we are as a firm and where we're going.''
Knight's contract with PaineWebber can be terminated by either party with 60 days' notice, 30 days in ''certain limited circumstances,'' according to an SEC filing. The firms have worked together since March 1998, a Knight spokeswoman said.
A PaineWebber spokeswoman declined to comment on Knight's move, and said the firm has more than 130 clearing clients.
Aug/26/1999 16:41 <<
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