Interesting comments from KP in this article (from August 26th) biz.yahoo.com :
NITE, in KP's view, was technically oversold before the 6 point run up.
MER-related savings should be multi-millions on an annualized basis.
Thursday August 26, 4:28 pm Eastern Time
FOCUS - Merrill to clear Knight/Trimark's trades
(adds CEO's & analyst's comments, details. PVS JERSEY CITY)
By Jack Reerink
NEW YORK, Aug 26 (Reuters) - Knight/Trimark Group Inc. (Nasdaq:NITE - news), which is the biggest buyer and seller of stocks on the Nasdaq stock exchange, said on Thursday it would move its clearing, or stock-processing, business to the largest U.S. brokerage, Merrill Lynch and Co. Inc. (NYSE:MER - news)
Knight/Trimark, which currently clears stock trades through the No. 5 U.S. broker, PaineWebber Group Inc. (NYSE:PWJ - news), said it would move the business to Merrill in mid-October because it wanted to expand into overseas and options markets. Merrill has a bigger international network than PaineWebber, and it clears stock options, which PaineWebber does not, a Knight/Trimark spokesman said.
Knight/Trimark, based in Jersey City, N.J., is Nasdaq's biggest market maker, offering to buy and sell stocks at posted prices. Once Knight/Trimark carries out a stock trade, it sends it to a clearing broker, which processes and guarantees the trade.
By early afternoon, Knight/Trimark's stock price was up $5.38, or 16 percent, to $39.38 on heavy Nasdaq volume of 15.2 million shares. Merrill's stock price gained 81 cents to $79.50, and PaineWebber shares declined 31 cents to $42.63, both on the New York Stock Exchange.
Investors probably bought the stock because they expected that Merrill, once it starts offering online stock trading later this year, will send those customer trades to Knight/Trimark, said analyst Amar Mehta of CIBC World Markets. That would give Knight, which carries out the brunt of online stock trades, a boost in revenues at a time when online trading volumes are flat, Mehta added.
``We had already pointed out that, once Merrill goes online, where else is it going to go?' Mehta said.
In addition, Knight/Trimark said it negotiated a deal with Merrill that would result in lower costs.
``We expect to recognize savings measured in the multi-millions (of dollars) on an annualized basis,' said Knight/Trimark's chief executive, Ken Pasternak, in a short telephone interview. ``That number can go up and down depending on what our (trading) volumes are.'
Pasternak said he was pleased but somewhat surprised by the rally in his company's stock price.
``Our stock has been beaten down for the last four or five weeks; there are a lot of technical reasons why the stock should have rallied without this announcement,' Pasternak said.
Knight/Trimark shares have long been a favorite among online investors and have traded in line with shares of Web brokers such as E*Trade Group Inc(Nasdaq:EGRP - news) and AmeriTrade Holding Corp.(Nasdaq:AMTD - news). In the six months leading up to April, the stock's value increased 36-fold to a high of $81.63 from a low of $2.25, while E*Trade and AmeriTrade shares had similar gains.
In recent months, however, the stocks have fallen more than half because of investor worries that online brokers and their market makers could not keep up the double-digit quarterly growth in volumes of the past. Investors funneled about 500,000 trades a day through the Internet in the second quarter, about flat with the first quarter.
Knight/Trimark, which carried out 15.4 million trades in the second quarter, will become one of Merrill's Broadcort Capital Corp. clearing unit's biggest clients, a Merrill spokesman said.
Knight/Trimark reported in July it paid $19.8 million in execution and clearing fees in the second quarter. Both the Knight/Trimark and the Merrill spokesmen declined to say how much of those payments would go to Merrill under the deal.
Knight/Trimark's Pasternak also declined to outline the fees it pays its clearing broker, but said the ``largest portion' of around 10 items that made up the $19.8 million expense line went to PaineWebber in the second quarter.
A PaineWebber spokeswoman confirmed Knight/Trimark's decision to move its business to Merrill, but said the firm still provided clearing services to 130 brokers worldwide. |
