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April 30, 1998

Knight and Trimark File Registration to Go Public Can Their Success Be Parlayed Into Hot IPO?

By John A. Byrne with Stephen Lacey

Will the stunning success of an amazingly young Nasdaq wholesaler, and its affiliated third-market trading firm, be parlayed into a hot initial public offering? Jersey City's Knight Securities, and Trimark Securities in White Plains, N.Y., must hope so.

Roundtable Partners LLP, the holding company for both firms and its subsidiaries, is planning to go public this year on Nasdaq, filing a preliminary prospectus at the Securities and Exchange Commission on May 1. The proposed ticker symbol is NITE.

The prospectus noted that 10,000 common shares would be issued at an estimated offering price between $10 and $16. The lead manager is San Francisco-based BancAmerica Robertson Stephens.

Market Share

Both Knight, a Nasdaq wholesaler owned by a consortium of smaller broker dealers, and Trimark, a third-market firm, were launched in 1995, quickly building market share. As stock markets climbed and more money poured into mutual funds and stocks, Knight and Trimark were not far behind.

Knight's advertised share volume, ranked by Boston-based AutEx, grew from 614.7 million shares for January 1997, to 1.2 billion shares for December 1997, and to 1.9 billion shares this March, representing 9.9 percent of total market share.

According to the National Association of Securities Dealers, Trimark's reported share volume in New York Stock Exchange-listed securities grew from 234.2 million shares for January 1997, to 338.4 million shares for December 1997, to 445.6 million shares this March, representing 33.1 percent of total NYSE third-market volume.

With the acquisition of Chicago's Tradetech Securities, Trimark's volume grew most rapidly - to 2.4 billion shares for the three months ending March 31, from 1.5 billion shares for the comparable period in 1997. The volume accounted for 33 percent of Roundtable's overall share volume.

Employees

The combined trading entities employ 337 people. Of Knight's 246 staffers, 142 are employed in market-making activities. At Trimark, 55 people are employed in market-making activities. The firms clear their business through New York-based PaineWebber's subsidiary, Correspondent Services Corp.

Both firms named Omaha-based AmeriTrade, Boston's Brown & Company, San Francisco's Discover Brokerage and E*Trade, and global giant Merrill Lynch & Co. among its customers. While Knight and Trimark have strong niches executing retail-sized orders, the prospectus noted that they "plan to accelerate [their] penetration of the market for institutional investors, which it believes provides an opportunity for growth, and offers higher profit margins [than retail business]."

Knight also plans to increase its market share through the launch of its e.Knight software, which it said will enable broker-dealer and institutional customers to access Knight and Trimark from their desktops via the Internet and other electronic systems.