Knight Trading Sees Loss

Declining stock market volatility took its toll on

Knight Trading's

(NITE)

first quarter. The market maker expects to lose as much as 12 cents a share in the period, well short of the 10 cents of earnings analysts were predicting.

The loss estimate includes 5 cents to 7 cents a share of costs related to an international expansion and a 3-cent asset writedown.

Knight gets its profits from the bid-and-asked spread on stock trades and benefits from price movement. "Market conditions in the first quarter were marked by a sharp drop in marketplace volatility, with the VIX Index dropping below 20 -- a critically important level signaling complacency in the markets, and limiting trading opportunity for market makers," the company said. Knight also noted that the

Nasdaq Composite

fell 4.5% during the quarter and volume was also lower.

"Knight's options market-making business was affected by the quarter's lethargic market performance, and we are still seeking the appropriate structure and payment for order flow schedule necessary to maintain our strong position in an increasingly competitive options industry," the company said.