Oilbabe,
Notwithstanding today's action, I'm more enthusiastic for the prospects of NITE than I have been for any company since ASND.
NITE has come far, but it has done so primarily on the back of OLB equity order flow. It seems to me that that is nothing compared to what lies ahead. Indeed, it seems as if little or no value has been alloted to a number of growth areas in front of the company:
1. What is the potential value of institutional order flow, a market that is now being targeted?
2. What will be the value of options order flow from the ISE?
3. What will be the value international order flow?
4. What would happen if a brokerage, such as Merrill, "contracted out" the market making business to NITE, in return for back end clearing ($1/trade) and order flow payment?
I think the 6 point rise on Thursday, in reaction to the MER/NITE news, was just the first, fleeting, recognition of the vast potential that lies ahead.
For example, just limiting the discussion to MER-related benefits, we now have a situation where MER is going to be paid $1/trade for back-end clearing services. The assumption has been that that is for non-MER, i.e., OLB order flow.
But remember: MER also gets $1 for every MER-client trade that happens to get routed to NITE. This is what is known as incentive. Given that incentive, what do you think will happen with Merill-client trades, particularly where MER does not make a market. If MER sends the trade to Herzog, it doesn't get the back-end $1. It only gets that back-end $1, of course, for trades that happen to go to NITE. Add a little payment as necessary on the front-end (to match Herzog or any other market maker), and you get the picture as to what could result.
Gary Korn
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