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To: LPS5 who wrote (13582)	8/16/2001 3:20:21 PM
From: Libbyt	Read Replies (1) \| Respond to of 18137

Knight, Nasdaq's Biggest Stock Dealer,Imposes Explicit Fees on Transactions By Gaston F. Ceron and Lynn Cowan Dow Jones Newswires August 16, 2001 NEW YORK -- In a move likely to resonate throughout the stock-trading business, Knight Trading Group Inc., the biggest stock dealer in the Nasdaq Stock Market, has imposed explicit fees on stock transactions. The new policy was detailed in a July 30 letter sent to select Knight customers by Phil Rapp, a senior vice president at the company's Knight Securities unit. The letter said Knight will charge clients a transaction fee of 0.5 cent a share for each trade execution. The move aims to shield the Jersey City, N.J., firm's bottom line from the switch to trading stocks in one-cent increments. The smaller increments brought on by "decimalized" stock prices on U.S. markets have cut into the earnings of stock dealers. In the second quarter, Knight's net income fell 94%. Such declines have led to industry speculation about the need to impose new pricing structures. Previously, many firms profited from the spread on stock trades, or the difference between the price bid to buy a stock and the price offered to sell it. The smaller increments make that much more difficult. "These changes are being made to reflect the value of providing liquidity in a one-cent minimum price variation environment," a Knight spokeswoman said. Knight's new policy is certain to be studied by competitors. Jeffrey Meyerson, vice president of trading at M.H. Meyerson & Co., said his firm hasn't yet moved to institute fees, but that he expects it will do so sooner rather than later. Lon Gorman, a Charles Schwab Corp. vice chairman, said fees have a "good chance of becoming standard practice" and that Schwab is studying them, although he cautioned that no final decisions have been made. A spokesman for Merrill Lynch & Co. said the firm is "speaking with many of our institutional buy-side clients as to the possibility of different payment options." Charging fees "would have been unheard of as little as six months ago, when volumes were higher and spreads fatter," said Russell Keene, an analyst at Keefe, Bruyette & Woods Inc. Write to Gaston F. Ceron at gaston.ceron@dowjones.com and Lynn Cowan at lynn.cowan@dowjones.com public.wsj.com