theniteowl - yes, the board is a bit on the deadish side, LOL! Anyhow, I'm trying my best to revive it. There are many boards out there, and it is my hope that SI can be the best qualitatively, if not quantitatively.
Surely, we don't have as many posts as Yahoo or RB, but perhaps the quality here could be what distinguishes the board. I'm not implying that RB doesn't have good posters (such as EZ), but most of these boards are marred by terrible personal attacks which do nothing to further our knowledge of NITE and only serve to waste time.
Here on SI, we too have had our periodic bouts of ad hominem attacks, but fortunately, it seems the board is maturing, and hopefully the bullies who launch personal attacks have learned that it will not be tolerated here.
Ideally, what I'd like to see, is this board become a genuine forum for high-quality posts dealing with NITE in a very comprehensive way. All points of view should be welcome, bears, bulls, etc., as long as expressed in a civil way, with plenty of backup arguments.
In fact, I don't like categorizing posters along lines like "bears", "bulls" etc. - the stock market is a much more complex enterprise, and it is often appropriate to have an equally complex view of any given stock rather than black or white bulls/bears.
A vigorous and civil discussion is the best way to reach valid conclusions. None of us has all the answers, and hopefully we all learn together. So, welcome to the SI NITE board!
I would like to see a comprehensive discussion of prospects for Easdaq, the Nikko-Japan venture, options in Europe etc., with plenty of background information (hence my posting of various articles etc.).
A while ago (2/19/00), I had a bunch of questions which I was hoping could be answered by IR, and maybe in time we can tackle these fully (these are just some questions, but a good beginning):
<<1) Is Arb.'s business based on options spread capture, or do they take significant options positions themselves, or is it a combination of the two (and if so, is it primarily weighted to trading or spread capture?). This has parallels with NITE's model (see point 2 below).
2) If a part of Arb's business is based on spread capture, then isn't the "revolution" in options business going to cut significantly into the spread? This is what happened with stocks in the 90s revolution. One of the reasons the options spreads are so wide, is because the trading of options is so inefficient, monopolized and outdated. As the same revolution that happened to stock trading happens here, spreads will be cut drastically. We all know a lot of options trading will move to electronic executions (this was also mentioned in the recent interview with L. Okser) - is this going to go through its own proprietary network (like the in-house matching and execution system NITE uses for their stock MM business), is this going to be a kind of general "options ECN" that is used by all options trading firms with joint ownership by all participating firms, or will NITE set up and control such an "options ECN", the same way Institnet was set up? Or perhaps actually options will be traded through traditional ECNs already set up, such as ISLD and INCA etc. [edit 04/02 - we know that ISE will have such an electronic execution system]
3)If the spreads on option trading are going to be cut, won't that affect Arb.'s stellar margins? Does that mean that going forward, we should NOT count on Arb. margins remaining the same? So we cannot extrapolate any future possible market share gains to come with the same margins. We all remember what happened to NITE when they introduced the mid-point pricing for 3Q 99. At least initially, there will be a giant hit, and going forward the market share will need to make up for that lower margin. So this is critically important information in our trying to get a fix on Arb?s future revenue and profit contributions. We cannot build a sensible model without knowing this.
4) In building a model of how Arb. works, we would like to know what are the conditions that are optimal for Arb. Is there a volatility index we should look at. Is it simply the same as NITE?s stock ? volatility capture based, instead of spread capture based. This is critical information ? look at Amy Butte to see where you end up if you don?t understand this. How does Arb. stack up against other options firms? Are Arb?s high margins a function of proprietary trading technology and/or trading practices, market niche etc., or is this true for many other options firms, and is just a function of the options business. We know that NITE differs significantly in their MM operation from other MM firms. Is it the same for Arb vs their peers?
5)We know that Arb intends to grow their market share. What are some of the main challenges they face, and how are they planning to overcome them. We know that NITE is very confident of growth on the order of AT LEAST 25-30% annually for the foreseeable future. What are Arb?s #, and projections?
6)What are the plans for international expansion of Arb?s business? What are some of the regulatory and other challenges to international expansion in specific markets? Is there a time frame for that expansion? How soon might we begin to see such an expansion and where? Are there any projections for revenue from international expansion?
7)This is a critical question: how will Arb.?s business be integrated into the business of NITE. I don?t mean here just things like NITE?s expertise and capital will be used to expand Arb?s business and market share. I mean actual synergistic business integration: f.ex. would Arb. augment with options some of the positions NITE is taking in the stock market? That has the potential to significantly boost the profits as well as provide risk control for NITE?s own trades. And it works the other way as well, NITE can help augment Arb?s trading profits in options through taking significant stock positions, and it can control risk for Arb. Is this something that is planned? Are there any regulatory issues involved in such an integration of operations?
8) How fast does NITE expect to grow their European business? Do they have a revenue # projection for the first quarter of 2001? What rate of revenue expansion do they expect? What are the main challenges in Europe?
9) How fast does NITE expect to grow their Japanese business? Do they have a revenue # projection for the first quarter of 2001? What rate of revenue expansion do they expect? What are the main challenges in Japan? What is the nature of the partnership with N.?
10) While it is clear that revenues are expanding, and volume is expanding, there is some controversy over NITE possibly losing market share in Nas and listed stocks and gaining in OTC in 1Q of 99. PW seems to think NITE is actually GAINING market share in naz and listed stocks, and not just gaining overall revenues.
11)From data available, some MMs seem to be doing really well. F.ex. MASH seems to have gained more market share in naz in 1Q relative to NITE, and the rate at which they are gaining seems to be steeper. Any comment? What is that due to (after all they?ve been part of Schwab for a long time). Is MASH taking market share at the expense of NITE?s ***rate*** of market share gain? Is MASH gaining market share from other MMs faster than NITE? What is NITE going to do to address the competition form MASH? What is NITE?s perspective on HRZG? It is our understanding that HRZG has embarked on an extremely ambitious program of technology investment ? they have set their guns on NITE in a big way. What is NITE?s reaction?
12) From information published before, we understand that volume by itself does not predict NITE?s profits. NITE needs volatility as well. However, I have seen information to the effect that volatility is not a linear variable for NITE?s profitability. Too much volatility actually CUTS into NITE?s profits. Optimally, NITE needs a **certain level** of volatility ? not too small, but not too great either. There is a sweet spot. Can they confirm that again? And if yes, then what is that sweet spot? And is it possible to adjust their trading techniques to redefine that sweet spot in the future to adjust to higher volatility, or is it a deeper algorithm limitation?
13) What *exactly* is the purpose of advertising Knight in the media? Will there be similar advertising in Europe and Japan? What are the costs involved going forward? Will this be an ongoing cost of business?
14) What is the exact view KP has of NITE as a stock? Does KP truly think NITE ought to be a value stock where a low p/e is appropriate? Does he think NITE should trade as a financial stock, with a low p/e? If so, then I think it is only fair to state that, because many holders of NITE would instantly abandon the stock if they truly believed that KP is dedicated to positioning the stock as a value stock which will only see modest rewards for outstanding earnings (low p/e) ? that is a prescription for a permanently low share price relative to tech stocks (not even talking about momentum stocks ? forget that). I think many invested in NITE because they expect at least a 100-200% yearly shareprice appreciation. With a low p/e financial stock, a ?value? stock, you can forget it. That means ?goodbye? for many shareholders. It is only fair that KP clarify his remarks, since it was he who made them. We are not asking for a crystal ball or future price predictions ? only KP?s VIEW OF THE STOCK ? since he **DID** make remarks ? now he should explain them. I know for sure, that if KP came out and stated that his view of NITE is a quintessentially financial stock, a value stock, a low p/e stock ? at least 3 friends of mine who are invested in NITE would instantly bail ? they don?t want to stick around with a CEO whose vision of what is an appropriate position for his stock differs so dramatically from their own. Such an CEO will do nothing to promote the stock and try to position it for a high p/e.
15) How does KP see the function of PR at NITE, and what are the plans for it in the future. I know there are supposed to be some changes, but what does that mean exactly? Are we finally going to see some effort to promote the company and stock?
16)What is KP?s view of NITE?s stock action over the past year. He may not wish to answer this question, but who knows.>>
Morgan |
