Knight Trading Warns

It cites 'lethargic' equity markets.
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Knight Trading


issued an increasingly customary profit warning Wednesday, saying soft equity markets would cause an unexpected loss in the third quarter.

Knight, which makes markets in


stocks and runs an asset-management business, expects to lose between 1 cent and 4 cents a share in the quarter, including a gain of about 2 cents a share related to the reversal of a litigation reserve.

Analysts surveyed by Thomson First Call had been forecasting earnings of 4 cents a share in the quarter.

"Persistent lackluster market conditions resulted in modest operating losses in our equity markets and asset management businesses in the third quarter," Knight said. "While we continued to make investments in strategic areas such as building our institutional sales office in London, lethargic market activity led to low volumes and weaker revenue capture per dollar value traded."

The company said healthy options volume drove profitability in its derivative markets operation.

"Ours is a cyclical business and the question is not if the market will rebound, but when," Knight assured.