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

To: Gary Korn who wrote (4966)	10/13/1999 9:52:00 AM
From: Gary Korn	Read Replies (1) \| Respond to of 10027

CC cont. Q: Payment for order flow, elasticity going forward? A: This is volume driven, not profit driven. On a per share basis, our payment for order flow costs did not change from 2Q to 3Q. Q: ISE? Instit. volume? A: Instit. business is much more profitable. So, while 28% of revenues, it is 7 to 10% of volume. As for ISE, a multi-particant system provides faster, cheaper, better execution for investors. ISE is very well strategically set to be there in a multiparticant system. Will not be up in March (shit), but will be a very big competitor to legacy exchanges. Q: Tax rate going forward? A: About 38 1/2 percent. Q: Potential new sources for order flow? Volume this quarter from related parties. Will they diversify order flow? A: We don't see a lot of change from original group. Minimal destination redundancy. If you look at 1.5B in advertising by OLB group, we get a vast majority of that order flow. We'll be a major beneficiary of that massive advt. campaing. To increase market share within that exisitng group, potential is low. However, outside the group, online national firms, where we still have a quite small market share, we think we can grow that business at very, very fast rates. Conversion of offline accts. to online, we'll be a major benef. of that. Very optimistic about that. Back to the OLB group, acct. growth is very healthy. That is good for us. Q: 30% growth rate, doesn't include first 2Q of 1999? A: Yes. Including 2000, i'm comfortable with 30% over 1999. Not comfortable with 30% q over q in first 2 quarters. Q: How get 30%? A: Revenue capture in late Sept, early Oct has returned to $8 level. This was enabled by high volatility. Better than the $6 level in 3Q. Volatility is the key. Revenue capture compression won't be impacted negatively if vol. + vol stays up. Decimilization could compress revenue capture 5 to 10 percent, but this will enable us to grow market share at the same time. Many experts say there will be a signif. reduction in rebate or abolition of rebate in a decimal pricing world. So, while revenue capture would go down, margins would remain consistent with 30% target. Q: By stock, any diminution in market share? A: Near term, market share is holding pretty steady at 14 to 15 perct. No one is making inroads to us. Advt. of OLB, market penetration and national companies all will help. We are going to be able to grow market share. In fact, our year over year numbers are healthier. Q: Some say that your cost is 10 times greater than what ISLD charges? A: We don't charge anything. In fact, ISLD is infinitelyh higher, when we perform ECN function. If you send a market order to NITE, ISLD will reject it. Limit order display match (apple to apple), we charge zero. And have a higher prob. of match. As for market order, ISLD rejects it. Q (Sean Chin): Grasp of volatility issue? A: Midpoint pricing is an opportunity cost, not an expense. Decreased revs. 7 to 10MM. Diff. between 1Q and now is that 1Q had extremely high volatility in internet stocks. Now, back to historical norms. Q (Sean Chin, Merrill): Savings from Merrill pact? A: Interesting that a Merrill employee is asking, we are on a confidentiality agreement not to release the rate! Greater than 30% savings per trx. We persuaded NASD to reduce Selectnet fee from 1 to 20 cents just last month. Savings there. We are the largest single user of selectnet. We pay more to ECNs on a monthly basis than we do on clearance. North of 2MM a month we pay to ECNs. We would save 20 to 40MM a year if they abolished the fee. Q: (Sean Chin); Order flow from top 5 customers? A: 35 to 40 percent.