Knight tumbles on 3Q warning

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Knight Trading Group, Inc. (Nasdaq: NITE) was down 27 percent ahead of Wednesday's opening bell after announcing it will post lower than expected third quarter earnings. The company cited a difficult market environment in the late summer and expenses to build its international capabilities.

Shares in the company were down 8.69 to 23.5 on the Island ECN, after closing down 6 percent Tuesday, before the news was announced. Shares in E*Trade (Nasdaq: EGRP), one of the big online brokers for which Knight processes trades, was also down 8 percent, or 1.31 to 14.5 in pre-market trading. E*Trade broke even in its third quarter, despite an acknowledged market volatility.

The company will release its official third quarter results on Wednesday, October 18.

In Knight's second quarter earnings call July 19, it said it was comfortable with 20 percent to 30 percent growth in the third quarter 2000 versus the previous year period, when it earned 22 cents per share, less expenses related to its international expansion.

Knight now expects to announce third quarter earnings in the range of 13 to 16 cents a share, including the impact of about 7 cents a share in expenses for its international expansion.

First Call was expecting a profit of 31 cents a share for the third quarter.

"While our trading model continued to perform well regardless of market direction, the corrections in Nasdaq resulted in less trading activity by self-directed individual investors," CEO and president Kenneth D. Pasternak said in a statement. He added that results were exacerbated by the seasonally slow third quarter.

Online brokerage firms may also be impacted by the news; Ameritrade (Nasdaq: AMTD) closed down 0.06 to 16.56, DLJ Direct (NYSE: DIR) closed down 0.38 to 6.69 and Charles Schwab (NYSE: SCH) closed down 1.44 to 33.56.