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Non-Tech : Knight/Trimark Group, Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Gary Korn who wrote (3890)	9/11/1999 8:21:00 PM
From: Gary Korn	Respond to of 10027

ECN liquidity fee vs. Spread If NITE makes 1/16th on the spread, that is 6.25 cents per share. Therefore, the equivalent "gross profit" on the ECN model is just that, a liquidity fee of 6.25 cents per share. The highest liquidity fee I've seen so far is about 1.5 cents per share. So, given a spread of 1/16th, NITE has something of a 4 to 1 gross profit advantage over the ECN model. As I stated in my prior post, NITE can do a lot with this gross profit advantage, including the making of payments to induce order flow. Moreover, as I stated in the prior post, ECN competition will reduce liquidity fees. That will only give NITE an even larger pricing power advantage. One could argue that, as decimalization nears and spreads themselves narrow (to as little as one penny), NITE would want to see intense ECN competition, so that these ECNs reduce their liquidity fees as low as possible. Thus, even at a 1 penny spread, NITE would have a 4 to 1 pricing power advantage over the current ISLD liquidity fee of 1/4 penny per share. Gary Korn

To: Gary Korn who wrote (3890)	9/11/1999 8:32:00 PM
From: gbh	Read Replies (1) \| Respond to of 10027

Gary, good post. But you must realize NITE doesn't net $62.50 for every 1000 shares handled. In fact, they probably net, on average, just a few bucks, maybe less. This is true even for market orders. Remember, there is not always a retail buyer for those shares they shares they just bought from you at market. And if the markets turn bearish, I wonder how well their "proprietary" trading and risk management skills will hold up? Remember, this company has never seen a bear market of more than a couple months. What's that old saying, "Don't mistake brains for a bull market". :) But getting back to the OLB and ECN discussion, there is just too much money flowing to the ECNs from the OLBs for this to be taken lightly. Perhaps it is just a bet hedging strategy, but I would think they (OLBs) have some other ideas on how these investment will net them real dollars some time in the not too distant future. gary