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| Is Knight a different company
today than it was a year ago? Yes, and it’s still in transition. I came to Knight in 2002 because, over the years, I had seen the company grow from an entrepreneurial start-up into a market leader. I saw an opportunity as did others, and we have been fortunate to attract a number of talented and experienced people. Together with Knight’s existing talent, we have developed a new philosophy to focus on our clients by restructuring around them, and by building the innovative products and tools they desire. What is the most promising opportunity for Knight? Knight is putting the pieces into place for what we believe will be a world-class institutional business with a recognized and respected brand. Knight has the expertise to execute institutional orders based on client needs. And we are uniquely positioned to offer comprehensive yet unbundled trade execution services across the full depth and breadth of the market. How will Knight differentiate itself from other trade execution service providers? We are in a new era where trade execution capabilities and client relationships matter most. With our capital commitment, liquidity and the right technology, Knight strives to be among the best trade execution providers in the industry. When it comes to client relationships, we believe there is always room for improvement. That’s why we will continue to add individuals with reputations for superior client service. We want our trading desk to be a natural extension of our clients’ trading desks. What are the key challenges facing Knight? First, it’s the challenge of growing our institutional business at a time when investor confidence and market participation are at an all-time low. Knight faces the additional challenge of adjusting its original broker-dealer business to reflect the value of our liquidity and capital commitment. Market structure changes have pressured margins, so Knight must find ways to better price its liquidity. Does Knight expect the market environment to change, and if so, how will it affect Knight’s profitability? Bull or bear market, Knight’s goal is to reach and sustain profitability. There are no excuses. We have made painful but necessary cuts to our staff. We will continue to look for ways to reduce trading and clearing costs, and payment for order flow. Meanwhile, we look to increase revenues by attracting new clients and enhancing relationships with our existing clients. Is high-volume retail trading, and Knight’s dominance of this market, a thing of the past? We work and plan as though we won’t see retail investors return to the markets with the same frenzy as they participated in the late '90s. That said, Knight’s broker-dealer business continues to dominate market share by volume. We offer the most comprehensive trade execution services, backed by our willingness to commit capital and our ability to customize around our clients’ needs. We trade across nearly the entire equity securities marketplace. It’s this deep pool of liquidity that makes our broker-dealer business the foundation on which to grow an institutional business. What is Knight’s role in the marketplace? Knight broadens access to the capital markets. It sounds lofty, but we believe it’s true. Knight takes risk and commits its own capital to complete trades when liquidity doesn’t exist naturally in the marketplace. We trade in nearly every equity security. And, no one supplies more liquidity to a greater number of small and thinly traded stocks than Knight. By continuing to make markets and to provide liquidity in small- and mid-cap stocks, Knight plays a critical role in the capital formation process. What are some things we should look for from Knight in 2003? By focusing on our clients, we’re restructuring the company to provide the absolute best access to our entire menu of products and services. We continue to put great time and effort into building a corporate culture based on trust, integrity and accountability. I believe that by the end of 2003, you will see a more transparent, more cohesive organization. You’ll see a stronger institutional business than we had at the beginning of the year, and new pricing models in our broker-dealer business that appropriately reflect the value of its liquidity resource. All the while, we aim to continue along the pathway to profitability. What is Knight’s ultimate goal? Knight wants to set the industry standard for client service. It’s our boldest ambition. It’s an ideal that drives everything we do. All of our initiatives come down to this. Our restructuring around clients, our design of more and better products and services, and our changing corporate culture. By doing so, we will demonstrate our commitment to advancing our clients’ interests. We will earn their trust with every trade. Knight wants to be the trade execution provider with whom broker-dealers and institutions will always want to do business. |
