KNIGHT TRIMARK GROUP INC, S-1/A, 1998-06-10

KNIGHT TRIMARK GROUP INC
S-1/A, 1998-06-10
SECURITY BROKERS, DEALERS & FLOTATION COMPANIES

Previous: SYKES HEALTHPLAN SERVICES INC, S-1/A, 1998-06-10

Next: CARTER HOLDINGS INC, S-4 POS, 1998-06-10

<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 10, 1998
REGISTRATION NO. 333-51653
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

---------------

AMENDMENT NO. 3 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

---------------
KNIGHT/TRIMARK GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

---------------
DELAWARE 6211 52-2096335
(PRIMARY STANDARD INDUSTRIALCLASSIFICATION CODE NUMBER)
(I.R.S. EMPLOYER
(STATE OR OTHER IDENTIFICATION NUMBER)
JURISDICTION
OFINCORPORATION OR
ORGANIZATION)

NEWPORT TOWER, 29TH FLOOR 525 WASHINGTON BOULEVARD JERSEY CITY, NEW JERSEY
07310 (201) 222-9400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

---------------

MICHAEL T. DORSEY, ESQ. SENIOR VICE PRESIDENT AND GENERAL COUNSEL
KNIGHT/TRIMARK GROUP, INC. NEWPORT TOWER, 29TH FLOOR 525 WASHINGTON BOULEVARD
JERSEY CITY, NEW JERSEY 07310 (201) 222-9400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

---------------
COPIES TO:
MATTHEW J. MALLOW, ESQ. SKADDEN, ALEXANDER D. LYNCH, ESQ. BABAK YAGHMAIE,
ARPS, SLATE, MEAGHER & FLOM LLP919 ESQ.BROBECK, PHLEGER & HARRISON LLP1633
THIRD AVENUENEW YORK, NEW YORK BROADWAY, 47TH FLOORNEW YORK, NEW YORK
10022 (212) 735-3000 10019(212) 581-1600

---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]

If this form is a post-effective amendment filed pursuant to rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.

If delivery of the prospectus is expected to be made pursuant to rule 434,
please check the following box. [_]

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION, DATED JUNE 10, 1998

LOGO
10,000,000 SHARES

CLASS A COMMON STOCK

-----------

Of the 10,000,000 shares of Class A Common Stock offered hereby, 8,688,246
shares are being issued and sold by Knight/Trimark Group, Inc. (the "Company")
and 1,311,754 shares are being sold by a certain stockholder of the Company
(the "Selling Stockholder"). See "Principal and Selling Stockholders." The
Company will not receive any of the proceeds from the sale of shares by the
Selling Stockholder. Prior to this offering, there has been no public market
for the Class A Common Stock of the Company. It is currently estimated that the
initial public offering price will be between $14.00 and $16.00 per share. See
"Underwriting" for a discussion of factors considered in determining the
initial public offering price. The Company has applied to have the shares of
its Class A Common Stock approved for quotation in The Nasdaq Stock Market
("NASDAQ") as a National Market issue under the symbol "NITE."

The Company's outstanding capital stock is comprised of Class A Common Stock
and Class B Common Stock. The rights of holders of shares of Common Stock are
identical in all respects, except that the holders of Class B Common Stock are
not entitled to vote. Upon sale or transfer, shares of Class B are exchangeable
for shares of Class A Common Stock.

-----------

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.

SEE "RISK FACTORS" BEGINNING ON PAGE 8.

-----------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO THE SELLING
PUBLIC COMMISSIONS(1) COMPANY(2)(3) STOCKHOLDER
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.................... $ $ $ $
- --------------------------------------------------------------------------------
Total(3)..................... $ $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company and the Selling Stockholder have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended (the "Securities Act"). See
"Underwriting."
(2) Before deducting offering expenses payable by the Company estimated at
$1,500,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 1,500,000 shares of Class A Common Stock on the same terms
as set forth above, solely to cover over-allotments, if any. If such option
is exercised in full, the total Price to Public, Underwriting Discounts and
Commissions, Proceeds to Company and Proceeds to the Selling Stockholder
will be $ , $ , $ and $ , respectively. See "Underwriting."

-----------

The Class A Common Stock is offered by the Underwriters as stated herein
subject to receipt and acceptance by them and subject to their right to reject
any order in whole or in part. It is expected that delivery of such shares will
be made through the offices of BancAmerica Robertson Stephens, San Francisco,
California, on or about , 1998.

BANCAMERICA ROBERTSON STEPHENS
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
ABN AMRO INCORPORATED
SOUTHWEST SECURITIES

The date of this Prospectus is June , 1998
<PAGE>

NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDER OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES OR AN OFFER TO, OR A SOLICITATION OF, ANY PERSON IN ANY JURISDICTION
WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

----------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.................................................................. 3
Risk Factors............................................................. 8
Use of Proceeds.......................................................... 20
Dividend Policy.......................................................... 20
Capitalization........................................................... 21
Dilution................................................................. 22
Selected Consolidated Financial Data..................................... 23
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 24
Business................................................................. 36
Management............................................................... 49
Certain Transactions..................................................... 58
Principal and Selling Stockholders....................................... 62
Description of Capital Stock............................................. 63
Shares Eligible for Future Sale.......................................... 66
Underwriting............................................................. 68
Legal Matters............................................................ 70
Experts.................................................................. 70
Additional Information................................................... 70
Index to Consolidated Financial Statements............................... F-1
</TABLE>

----------------

The Company intends to furnish to all of its stockholders an annual report
containing consolidated financial statements audited by its independent
accountants for each fiscal year and quarterly reports containing unaudited
financial data for each of the first three quarters of each fiscal year.

The Company was incorporated in Delaware in April 1998 under the name
Knight/Trimark Group, Inc. The Company's principal executive offices are
located at Newport Tower, 29th Floor, 525 Washington Boulevard, Jersey City,
New Jersey 07310, and its telephone number is (201) 222-9400.

Knight/Trimark, Knight, Trimark, e.Knight and eKnight, among other marks,
are common law trademarks of the Company. This Prospectus also includes
trademarks and tradenames of entities other than the Company.

----------------

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON
STOCK OF THE COMPANY, INCLUDING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
<PAGE>

SUMMARY

The following summary is qualified in its entirety by the more detailed
information included in "Risk Factors" and the Consolidated Financial
Statements and Notes thereto appearing elsewhere in this Prospectus. This
Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in "Risk Factors" and elsewhere in this Prospectus.
Unless otherwise indicated, (i) references in this Prospectus to the "Company"
mean prior to the Reorganization (as defined below), Roundtable Partners,
L.L.C. and its subsidiaries on a consolidated basis and, after the
Reorganization, Knight/Trimark Group, Inc. and its subsidiaries on a
consolidated basis, as appropriate, and (ii) references to "Common Stock" mean
the Class A Common Stock and the Class B Common Stock, taken together.

THE COMPANY

Knight/Trimark Group, Inc. is a leading market maker in NASDAQ securities and
in the over-the-counter ("OTC") market in exchange-listed equity securities
(the "Third Market"), primarily consisting of equity securities listed on the
New York Stock Exchange ("NYSE") and the American Stock Exchange ("AMEX"). The
Company has attained this leadership position by providing best execution
services to broker-dealer and institutional customers through its sophisticated
trading systems and proprietary methods. Through its wholly-owned subsidiary,
Knight Securities, Inc. ("Knight"), the Company makes markets in approximately
4,200 equity securities in NASDAQ and on the OTC Bulletin Board of the National
Association of Securities Dealers, Inc. ("NASD"). The Company, through its
wholly-owned subsidiary, Trimark Securities, Inc. ("Trimark"), makes markets in
all NYSE- and AMEX-listed equity securities in the Third Market.

Since the beginning of 1997, Knight and Trimark have significantly increased
their market share of trading volume in each of their respective markets.
According to The AutEx Group ("AutEx"), a widely- recognized industry reporting
service that provides daily statistics on trading activity and broker-dealer
market share, Knight's advertised share volume in NASDAQ increased from 614.7
million shares representing 4.4% of total market share (or a rank of 6th
overall) for the month of January 1997, to 1.2 billion shares representing 8.1%
of total market share (or a rank of 2nd overall) for the month of December
1997, to 1.9 billion shares representing 9.9% of total market share (or a rank
of 1st overall) for the month of March 1998. According to the NASD, Trimark's
reported share volume of the NYSE-listed securities increased from 234.2
million shares representing 21.2% of total NYSE Third Market volume (or a rank
of 1st overall) for the month of January 1997, to 338.4 million shares
representing 30.5% of total NYSE Third Market volume (or a rank of 1st overall)
for the month of December 1997, to 445.6 million shares representing 33.1% of
total NYSE Third Market volume (or a rank of 1st overall) for the month of
March 1998. Trimark's reported share volume of AMEX-listed securities increased
from 40.2 million shares representing 51.4% of total AMEX Third Market volume
(or a rank of 1st overall) for the month of January 1997, to 78.7 million
shares representing 66.4% of total AMEX Third Market volume (or a rank of 1st
overall) for the month of December 1997, to 80.4 million shares representing
68.9% of total AMEX Third Market volume (or a rank of 1st overall) for the
month of March 1998.

3
<PAGE>

price of the traded security. The increase in trading volume has resulted from
a number of factors, including the growth of cash flows into equity-based
mutual funds, historic high returns in U.S. equity markets, the emergence and
market acceptance of discount brokers, technological innovations, such as the
emergence of the Internet, and reduced transaction costs.

Changes in regulations governing the securities market, and to a lesser
extent, the move from securities being quoted in sixteenths rather than eighths
of a dollar, have dramatically reduced average spreads between bid and ask
prices. As a result, the Company believes that traditional brokerage firms are
increasingly electing to focus on their core competencies and to outsource
their market-making functions to independent market makers. In addition,
Internet brokers, who are handling increased trading volume, also utilize
independent market makers. According to AutEx, in March 1998, the three largest
independent market makers represented a combined market share of 25.4% of the
trading volumes of OTC equity securities, up from 17.2% in March 1997.
Similarly, according to the NASD, in March 1998 the three largest Third Market
trading firms represented a combined market share of 58% of the Third Market
volume in NYSE equity securities compared to 42% in June 1997. The three
largest Third Market trading firms in AMEX-listed securities represented a
combined market share of 75% in March 1998 compared to 55% in June 1997. While
a large volume of trading provides an opportunity to spread fixed costs over a
larger number of trades, net profit per trade has declined. As a result,
certain independent market makers, including the Company, are seeking new
trading methodologies to identify and take advantage of the profit
opportunities represented by each trade. These market makers are also seeking
to increase order flow in an effort to increase the number of trades they
handle, which, in turn, will provide increased trading profit opportunities.
These market makers require efficient and sophisticated systems and risk
management practices and personnel with the requisite expertise to deliver
superior trade execution and customer service, while handling increased order
flow and maintaining low costs per trade.

The Company provides "best execution" services to broker-dealer and
institutional customers. Pursuant to the NASD Conduct Rules, best execution
requires broker-dealers to buy and sell securities in a manner that provides
its customers with a price as favorable as possible under prevailing
conditions. Through its sophisticated trading systems and proprietary methods,
the Company is committed to providing a value-added execution methodology that
emphasizes automated execution and rule compliance, real-time information,
access to customers, and pricing plus liquidity advantages based upon the
Company's willingness to commit capital. While most of the Company's trades are
automatically executed electronically, automatic execution is highly dependent
on the determination and manual entry of bid-ask prices by traders.
Furthermore, the Company's trading revenues depend significantly on the
management of inventory by the Company's skilled and experienced trading
professionals. The Company believes that its highly skilled, experienced and
entrepreneurial workforce is uniquely positioned to provide high quality
customer service. In addition, the Company is currently implementing its
proprietary electronic communications gateway product, "e.Knight," which
enables broker-dealer and institutional customers to access the Knight and
Trimark trading systems from their desktops through the Internet and other
electronic communications gateways. The Company has made significant
investments in technology to enable the efficient processing of large volumes
of order flow, without diminishing speed of execution. The Company's systems
are designed to process up to 500,000 trades per day and in March, 1998,
handled a combined average of 134,000 trades per day. The Company's trading
methodology focuses on the dynamic, real-time analysis of market activity and
price movements, which enables the Company to better manage risk and quickly
adjust its trading strategy in an effort to maximize its trading profits.

The Company's goal is to maintain and enhance its leadership position in the
market-making industry by (i) continuing to invest in leading technologies to
ensure that it has the capability to process greater trading volumes, (ii)
increasing order flow to enhance its position as a leading market maker and to
create additional profit opportunities, (iii) accelerating its penetration of
the market for institutional investors, which it believes provides an
opportunity for growth and offers higher profit margins, (iv) investing in
human capital, by

4
<PAGE>

aggressively recruiting and retaining high caliber personnel to deliver best
execution and high quality customer service, (v) developing new services that
address evolving customer and technological requirements to establish new
customer relationships, and (vi) creating customer awareness of the link
between Knight and Trimark to leverage customer satisfaction in one market to
increased use of the Company's services in other markets.

The Company's marketing strategy is to continue to differentiate itself from
competitors by enhancing its reputation and brand as the provider of highest
quality execution solutions with superior customer service. The Company's
target customers are national and regional full-service broker-dealers,
electronic discount brokers and institutional investors. Certain of the
Company's customers include Ameritrade, Brown & Company, Discover Brokerage,
E*TRADE, Merrill Lynch, PaineWebber, Waterhouse Securities, and many leading
financial institutions.

CERTAIN TRANSACTIONS AND RELATIONSHIPS

The Reorganization and Certain Transactions. The Company was organized in
April 1998 for the purpose of succeeding to the business of Roundtable
Partners, L.L.C. (the "LLC"). Concurrent with the closing of the Offering,
based on an assumed initial public offering price of $15.00 per share, all of
the member interests of the LLC will be exchanged for 36,659,585 shares of
Class A Common Stock of the Company and 3,945,528 shares of Class B Common
Stock of the Company. Prior to the Reorganization, management owned 40% and the
broker-dealer owners owned 60% of the LLC. By agreement among the members of
the LLC, the allocation of Common Stock to the broker-dealer owners is based
upon an approximation of the fair market value of each such broker-dealer
owner's interest in the LLC. One broker-dealer owner of Common Units of the LLC
will receive Class B Common Stock in lieu of Class A Common Stock due to
certain regulatory constraints that prevent this broker-dealer owner from
holding any class of voting stock. Certain members of the LLC, including
management, who have so elected, will receive 1,741,581 additional shares of
Class A Common Stock valued at the initial public offering price with respect
to their share of the undistributed income of the LLC through March 31, 1998
(the "Undistributed Profits"). Management of the Company has elected to receive
shares of Class A Common Stock for all of its Undistributed Profits. The
Company will receive no additional consideration in connection with such
conversion of member interests into shares of Common Stock. In connection with
the exchange, Knight will become the successor entity to Knight Securities,
L.P., and Trimark will become the successor entity to Trimark Securities, L.P.
(the foregoing transactions, collectively, shall be referred to herein as the
"Reorganization"). Prior to the effective date of the Registration Statement of
which this Prospectus is a part, certain non-management members of the LLC, who
have so elected, will receive a cash distribution of all or a portion of their
Undistributed Profits. Concurrently with such distribution, the LLC intends to
make a cash distribution to each member of an estimate of its share of the
total amount of profits of the LLC accruing between April 1, 1998 and the
closing of this Offering. Such cash distribution to members of the LLC is
currently estimated to be $16.4 million (based on operating results through May
31, 1998).

Transactions with Affiliates. Immediately prior to the Reorganization, 60% of
the member interests of the LLC will be owned by a consortium of 27 broker-
dealers or their affiliates. Additionally, Brown & Company Securities
Corporation ("Brown"), a major customer of the Company, held subordinated debt
of the LLC and an option to purchase member interests in the LLC (the "Brown
Option"). Brown has agreed with the Company that it will exercise its option
concurrent with the closing of the Offering in exchange for 394,887 shares of
Class A Common Stock of the Company at a total exercise price of $71,430. After
the closing of this Offering, such broker-dealer owners, including Brown, will
own 48.5% of the Company's Common Stock (47.2% if the Underwriters' over-
allotment option is exercised in full). For the period from March 27, 1995
through December 31, 1995, the years ended December 31, 1996 and 1997, and the
three months ended

5
<PAGE>

March 31, 1998, the broker-dealer owners and subordinated note holders, were
the source of 31.3%, 35.1%, 39.8%, and 41.3%, respectively of the Company's
total order flow. For the period from March 27, 1995 through December 31, 1995,
the years ended December 31, 1996 and 1997, and the three months ended March
31, 1998, aggregate payments by the Company to its broker-dealer owners and
subordinated note holders for order flow and aggregate profit distributions to
broker-dealer owners equaled $14.4 million and $1.7 million, $46.4 million and
$10.6 million, $50.7 million and $13.4 million, and $11.3 million and $5.0
million, respectively. See "Certain Transactions."

Pursuant to the limited liability company agreement of the LLC, its broker-
dealer owners have partially shared in the LLC profits in proportion to their
equity interest and partially in proportion to the quantity of order flow they
have directed to the Company. This arrangement will be discontinued upon
consummation of the Reorganization. The broker-dealer owners will no longer
receive any special inducements to send order flow to the Company and will not
be contractually or otherwise obligated to provide the Company with any order
flow in the future. Although the Company believes that, based on the high-
quality execution services it provides, these broker-dealer owners will
continue to use the Company's services, there can be no assurance that the
absence of such incentives will not cause the Company's broker-dealer owners to
reduce the level of or discontinue order flow they direct to the Company in the
future. See "Risk Factors--Risks Associated with Change of Ownership
Structure."

Four of the Company's broker-dealer owners--Ameritrade, Discover Brokerage,
E*TRADE and Waterhouse--and Brown, a subordinated note holder, were the
Company's five largest customers in 1997, representing 29.4% and 33.8% of the
Company's order flow for the year ended December 31, 1997 and the three months
ended March 31, 1998, respectively. While the Company believes it will continue
to receive significant order flow from these broker-dealer owners and
subordinated note holder, there are no contractual arrangements to this effect,
and there can be no assurance that any of them will continue to use the
Company's services.

THE OFFERING

<TABLE>
<S> <C>
Class A Common Stock Offered by the Compa- 8,688,246 shares
ny.......................................
Class A Common Stock Offered by the Sell- 1,311,754 shares
ing Stockholder..........................
Common Stock to be Outstanding after the
Offering:
Class A Common Stock.................. 47,484,299 shares
Class B Common Stock.................. 3,945,528 shares
Total............................... 51,429,827 shares
Use of Proceeds........................... To redeem all outstanding shares of
Preferred B Units, for working
capital and for general corporate
purposes. See "Use of Proceeds."
Proposed NASDAQ National Market Symbol.... NITE
</TABLE>

6
<PAGE>

SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
MARCH 31, 1998
------------------------------------
ACTUAL PRO FORMA(3) AS ADJUSTED(4)
-------- ------------ --------------
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF FINANCIAL
CONDITION DATA:
Cash and cash equivalents................ $ 5,429 $ 5,501 $111,506
Securities owned, at market value ....... 63,490 63,490 63,490
Receivable from clearing brokers......... 78,119 78,119 78,119
Total assets............................. 171,073 171,144 277,150
Securities sold, not yet purchased, at
market value............................ 54,581 54,581 54,581
Distributions on Common Units payable to
members................................. 8,767 35,288 35,288
Mandatorily Redeemable Preferred Units... 27,484 13,847 --
Owners' equity........................... 59,990 33,540 153,893
</TABLE>

<TABLE>
<CAPTION>
PERIOD FROM
MARCH 27, THROUGH YEAR ENDED THREE MONTHS
DECEMBER 31, DECEMBER 31, ENDED MARCH 31,
----------------- ----------------------- ---------------------
1995 1996 1997 1997 1998
----------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OTHER OPERATING DATA:
Total shares traded..... 4,741,868 10,757,930 18,122,830 3,392,640 7,406,164
Total trades executed... 4,993 11,598 20,264 3,780 7,572
Average daily
trades(5).............. 26 46 80 63 124
Average daily net trad-
ing revenue(6)......... $ 356 $ 724 $ 888 $ 841 $ 1,033
</TABLE>
- --------
(1) Pro forma income tax expense was computed based on an effective tax rate of
46%, 43% and 43%, respectively, for the periods ended December 31, 1995,
1996 and 1997, and 43% for the first three months ended March 31, 1997 and
1998.

(2) Shares used to compute per share data for the year ended December 31, 1997
and the three months ended March 31, 1998 represent Common Stock
outstanding immediately after the Reorganization and the exercise of the
Brown Option, but before the Offering. See "Certain Transactions." Pro
forma earnings per share have not been presented for prior periods as the
Common Unit to Common Stock exchange effective with the Reorganization
would not result in comparable results if applied to prior periods.

(3) Pro forma to give effect to the Reorganization, the exercise of the Brown
Option and the redemption of the Preferred A Units and the redemption of a
portion of the Preferred B Units. See "Certain Transactions" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

(4) As adjusted to reflect the sale of 8,688,246 shares of Class A Common Stock
offered hereby at an assumed initial public offering price of $15.00 per
share and the application of the estimated net proceeds therefrom. See "Use
of Proceeds" and "Capitalization."
(5) Average daily trades was computed by dividing total trades executed by the
aggregate number of trading days in each respective period.
(6) Average daily net trading revenue was computed by dividing net trading
revenue by the aggregate number of trading days in each respective period.

Except as otherwise indicated, all information in this Prospectus assumes (i)
no exercise of the Underwriters' over-allotment option, (ii) the consummation
of the Reorganization, (iii) the exercise of the Brown Option and the issuance
of 394,887 shares of Class A Common Stock therefor (the "Option Exercise") and
(iv) the filing of the Amended and Restated Certificate of Incorporation of the
Company to effect an increase in the Company's authorized capital stock to
200,000,000 shares of Class A Common Stock, 20,000,000 shares of Class B Common
Stock and 20,000,000 shares of Preferred Stock.

7
<PAGE>

RISK FACTORS

This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements and from the results
historically experienced as a result of certain factors, including those in
the following risk factors and elsewhere in this Prospectus. In addition to
the other information contained in this Prospectus, the following risk factors
should be considered carefully in evaluating the Company and its business
before purchasing shares of the Class A Common Stock offered hereby.

RISKS ASSOCIATED WITH FLUCTUATIONS IN THE SECURITIES BUSINESS GENERALLY

The securities industry has undergone several fundamental changes as a
result of new regulation at the federal and state level, the emergence of
electronic discount brokers, the increased prominence of institutional
investors, consolidation among firms in the securities industry and the
increased use of technology. These changes have resulted in an increase in the
volume of equity securities traded in the U.S. equity markets and a general
decrease in the spreads market makers receive. There can be no assurance that
the spreads market makers receive upon execution of trades in equity
securities will not continue to decrease in the future. A substantial portion
of the Company's revenues are derived from market-making activities relating
to securities that trade in NASDAQ. In the past, NASDAQ has taken regulatory
actions designed to reduce spreads between bid and ask prices for securities.
NASDAQ, NYSE and AMEX are currently examining proposed regulations pursuant to
which securities will trade in decimals rather than in fractions. The adoption
of such proposed regulations would likely result in a further decrease in
spreads between bid and ask prices, which could make the execution of trades
and market making less profitable. Any further decline in the spreads that
market makers receive in trading equity securities could have a material
adverse effect on the Company's business, financial condition and operating
results.

Although the Company derives most of its revenue from trading in existing
securities, its volume of market-making activities also depends on the number
and size of new equity offerings. By increasing the number and volume of
securities available for trading, new offerings increase the potential for
aftermarket trading activity. However, the market for equity offerings has
historically experienced significant volatility not only in the number and
size of equity offerings, but also in the aftermarket trading volume and
prices of newly-issued securities. The number and size of equity offerings may
decline during periods of market uncertainty occasioned by concerns over,
among other things, inflation, rising interest rates and related economic
issues as well as a slowdown or reversal of cash flows by mutual funds and
other institutional investors into the U.S. equity markets. The recent demand
for new equity offerings has been driven in part by mutual funds and other
institutional investors. A decline in cash flows into the U.S. equity markets
or a slowdown in investment activity by mutual funds and other institutional
investors may have an adverse effect on the securities markets generally and
could result in lower revenues from the Company's market-making activities.
Any reduction in revenues resulting from a decline in the number and size of
new equity offerings or the aftermarket trading volume of such offerings could
have a material adverse effect on the Company's business, financial condition
and operating results.

The securities business is also subject to various other risks, including
customer default, employees' misconduct, errors and omissions and litigation.
Losses associated with these risks could have a material adverse effect on the
Company's business, financial condition and operating results.

RISKS ASSOCIATED WITH CHANGE OF OWNERSHIP STRUCTURE

The Company has historically derived a substantial portion of its order flow
from its broker-dealer owners. In the years ended December 31, 1996, 1997 and
the three months ended March 31, 1998, order flow from broker-dealer owners
and subordinated note holders represented 35.1%, 39.8% and 41.3% of the
Company's total order flow, respectively. The Company's broker-dealer owners
have shared in profits partially in proportion to their equity interest and
partially in proportion to the quantity of order flow they have directed to
the Company. This arrangement will be discontinued upon consummation of the
Reorganization.

8
<PAGE>

The Company's broker-dealer owners are not contractually or otherwise
obligated to provide the Company with any order flow, and after the
Reorganization may no longer have sufficient inducement to do so. There can be
no assurance that the absence of such incentives will not cause the Company's
broker-dealer owners to reduce or discontinue the level of order flow they
direct to the Company in the future. The loss of, or a significant reduction
of, order flow from such broker-dealer owners could have a material adverse
effect on the Company's business, financial condition and operating results.
See "Certain Transactions--The Reorganization." Certain of the Company's
broker-dealer owners may engage in market-making activities on their own in
the future. In such event, they may use the Company's execution services less
frequently and will compete with the Company for order flow.

GOVERNMENT REGULATION

The securities industry in the United States is subject to extensive
regulation under both federal and state laws. In addition, the U.S. Securities
and Exchange Commission (the "SEC"), the NASD, other self-regulatory
organizations ("SROs"), such as the various stock exchanges, and other
regulatory bodies, such as state securities commissions, require strict
compliance with their respective rules and regulations. As a matter of public
policy, regulatory bodies are charged with safeguarding the integrity of the
securities and other financial markets and with protecting the interests of
customers participating in those markets, not protecting creditors or
stockholders of market makers. Market makers are subject to regulation
concerning certain aspects of their business, including trade practices,
capital structure, record retention and the conduct of directors, officers and
employees. Failure to comply with any of these laws, rules or regulations
could result in censure, fines, the issuance of cease-and-desist orders or the
suspension or disqualification of its directors, officers or employees, and
other adverse consequences, which could have a material adverse effect on the
Company's business, financial condition and operating results. The Company and
certain of its officers and other employees have, in the past, been subject to
claims arising from the violation of such laws, rules and regulations, which
resulted in the payment of fines and settlements. There can be no assurance
that the Company and/or its officers and other employees will not, in the
future, be subject to claims arising from the violation of such laws, rules
and regulations. An adverse ruling against the Company and/or its officers and
other employees, including censure or suspension, could result in the Company
and/or its officers and other employees being required to pay a substantial
fine or settlement, and could result in their suspension or expulsion, which
could have a material adverse effect on the Company's business, financial
condition and operating results.

The regulatory environment in which the Company operates is subject to
change. The Company's business, financial condition and operating results may
be adversely affected as a result of new or revised legislation or regulations
imposed by the SEC, other United States or foreign governmental regulatory
authorities or the NASD. The Company's business, financial condition and
operating results also may be adversely affected by changes in the
interpretation or enforcement of existing laws and rules by these governmental
authorities and the NASD.

Additional regulation, changes in existing laws and rules, or changes in
interpretations or enforcement of existing laws and rules often directly
affect the method of operation and profitability of securities firms. The
Company cannot predict what effect any such changes might have. Furthermore,
the Company's business, financial condition and operating results may be
materially affected not only by regulations directly applicable to it, but
also by regulations of general application. For example, the volume of the
Company's market-making activities in a given period could be affected by,
among other things, existing and proposed tax legislation, antitrust policy
and other governmental regulations and policies (including the interest rate
policies of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board")) and changes in interpretation or enforcement of existing laws
and rules that affect the business and financial communities. The level of
trading and market-making activity can be affected not only by such
legislation or regulations of general applicability, but also by industry-
specific legislation or regulations.

9
<PAGE>

The Company's business, both directly and indirectly, relies on the Internet
and other electronic communications gateways. The Company intends to expand
use of such gateways. To date, the use of the Internet has been relatively
free from regulatory restraints. However, the SEC, certain SROs and certain
states are beginning to address the regulatory issues that may arise in
connection with the use of the Internet. Accordingly, new regulations or
interpretations may be adopted that constrain the Company's and its customers'
ability to transact business through the Internet or other electronic
communications gateways. Any additional regulation of the use of such gateways
could have a material adverse effect on the Company's business, financial
condition and operating results.

In addition, the Company may in the future expand its business to other
countries. To expand its services internationally, the Company would have to
comply with regulatory controls of each specific country in which it conducts
business. The brokerage industry in many foreign countries is heavily
regulated. The varying compliance requirements of these different regulatory
jurisdictions and other factors may limit the Company's ability to expand
internationally. There can be no assurance that the Company will be successful
in obtaining the necessary regulatory approvals for any such expansion, or if
such approvals are obtained, that the Company will be able to continue to
comply with such regulations. The failure to obtain or comply with such
approvals could have a material adverse effect on the Company's business,
financial condition and operating results. See "Business--Government
Regulation."

RISKS ASSOCIATED WITH DEPARTMENT OF JUSTICE AND NASDAQ INVESTIGATIONS

The Company's market-making activities involve securities traded in NASDAQ.
NASDAQ's operations have been the subject of extensive scrutiny in the media
and by government regulators, including the Antitrust Division of the United
States Department of Justice. This scrutiny has included allegations of
collusion among NASDAQ market makers. In fact, a large group of NASDAQ market
makers, including Spear Leeds & Kellog/Troster Singer, a former employer of
Messrs. Pasternak, Raquet and Steinman, recently entered into a Stipulation
and Order with the Department of Justice in which they agreed not to engage in
any collusive activities relating to prices, quotes or spreads in NASDAQ-
traded securities. The SEC is involved in an ongoing investigation of the
firms and individuals involved in such settlement. In August 1996, the SEC
adopted certain new rules and rule amendments, known as the Order Handling
Rules, which significantly altered the manner in which orders related to both
NASDAQ and listed securities are handled. The implementation of these rules
began in January 1997. The SEC has also issued for comment certain proposed
rules by the NASD which, if approved, would introduce a new system for
delivering and executing orders in NASDAQ. The proposed NASD rules, if
approved, along with other potential regulatory actions and improvements in
technology, could impact the manner in which business is currently conducted
in NASDAQ. These new rules, regulatory actions, and changes in market customs
and practices could have a material adverse effect on the Company's business,
financial condition and operating results.

RISKS OF SEC ENFORCEMENT ACTIONS

In connection with a three-year industry-wide investigation conducted by the
staff (the "Staff") of the SEC into the trading and supervisory activities of
many OTC market makers and certain of their individual supervisory and trading
personnel, in July, 1997, the Staff informed Kenneth Pasternak, President and
Chief Executive Officer of the Company, that he is a subject in their
investigation for certain of his activities as a trading room supervisor at
Troster Singer. All of the activities being investigated took place prior to
Mr. Pasternak joining the Company in 1995 and none of them relate to his
employment by the Company. Mr. Pasternak has also been orally informed by the
Staff that, as a result of its investigation, it currently intends to
recommend to the SEC that Mr. Pasternak be charged with failure to supervise
with respect to several transactions of other traders under his supervision at
Troster Singer and that Mr. Pasternak be suspended for six months, ordered to
cease and desist, and assessed a civil penalty of $50,000. In September, 1997,
Mr. Pasternak submitted a brief to the Staff arguing that these
recommendations would be inappropriate and unsupported by the facts. To date,
the Staff has not forwarded its recommendations to the

<PAGE>

SEC. The Company cannot predict the outcome of the Staff's investigation,
including whether the Staff will determine to forward its recommendations to
the SEC in their current or a modified form or at all. If any such charges are
brought, Mr. Pasternak intends to vigorously defend himself against them. If
Mr. Pasternak should be suspended, the Company would seek to replace his
services with other Company personnel. However, the loss of Mr. Pasternak's
services would have a material adverse effect on the Company's business,
financial condition and operating results.

In 1996, the staff advised Trimark that it was conducting an inquiry with
respect to Trimark and has asked that Trimark voluntarily provide the SEC with
certain documents. In March 1997, Trimark provided the Staff with the
information it had requested. Based upon the request for documents, it appears
that the Staff's inquiry concerns four areas: price improvement, protection of
limit orders, payment for order flow and trade reporting. The Staff has not
given any indication that it intends to carry out enforcement actions against
Trimark at this time. At this juncture, the Company is unable to determine
whether the Staff, after completion of its inquiry, may institute any action
and, if so, what the outcome will be.

SOLE DEPENDENCE ON MARKET-MAKING ACTIVITIES AND CREDIT RISKS ASSOCIATED WITH
CLEARING BROKERS

Substantially all of the Company's revenues are derived from market-making
activities. The Company expects its market-making activities to continue to
account for substantially all of its revenues for the foreseeable future. Any
factor adversely affecting market-making in general, or the Company's market-
making activities in particular, could adversely affect the Company's
business, financial condition and operating results. The Company's future
success will depend on continued growth in demand for its market-making
services and its ability to respond to regulatory and technological changes,
as well as customer demands. If demand for the Company's market-making
services fails to grow, grows more slowly than the Company currently
anticipates, or declines, the Company's business, financial condition and
operating results could be materially and adversely affected.

As a market maker of OTC and listed stocks, the majority of the Company's
securities transactions are conducted as principal with broker-dealer
counterparties located in the United States. The Company clears its securities
transactions through affiliated and unaffiliated clearing brokers. See
"Certain Transactions." Pursuant to the terms of the agreements between the
Company and the clearing brokers, the clearing brokers have the right to
charge the Company for losses that result from a counterparty's failure to
fulfill its contractual obligations. The Company's policy is to monitor the
credit standing of the counterparties with which it conducts business.
However, no assurance can be given that any such counterparty will not default
on their obligations, which default could have a material adverse effect on
the Company's business, financial condition and operating results. In
addition, at any time, a substantial portion of the Company's assets are held
at one or more clearing brokers and, accordingly, the Company is subject to
credit risk with respect to such clearing brokers. As of December 31, 1997 and
March 31, 1998, the Company's credit exposures were concentrated with the
clearing brokers and amounted to $30.2 million and $78.1 million,
respectively. Additionally, as of December 31, 1997 and March 31, 1998, the
clearing brokers held, as custodian, securities owned by the Company with a
market value of $61.7 million and $63.5 million, respectively. Consequently,
the Company is reliant on the ability of its clearing brokers to adequately
discharge their obligations on a timely basis. The Company is also dependent
on the solvency of such clearing brokers. Any failure by the clearing brokers
to adequately discharge their obligations on a timely basis, or failure by a
clearing broker to remain solvent, or any event adversely affecting the
clearing brokers, could have a material adverse effect on the Company's
business, financial condition and operating results.

RISK OF LOSSES ASSOCIATED WITH MARKET MAKING AND TRADING

The Company conducts its market-making activities predominantly as a
principal, which subjects the Company's capital to significant risks. These
activities involve the purchase, sale or short sale of securities for the
Company's own account and, accordingly, involve risks of price fluctuations
and illiquidity, or rapid changes in the liquidity of markets that may limit
or restrict the Company's ability to either resell securities it purchases or
to repurchase securities it sells in such transactions. From time to time, the
Company has large

11
<PAGE>

position concentrations in securities of a single issuer or issuers engaged in
a specific industry, which might result in higher trading losses than would
occur if the Company's positions and activities were less concentrated.

The success of the Company's market-making activities depends upon its
ability to attract order flow, the skill of its personnel, general market
conditions, the price volatility of specific securities and the availability
of capital. To attract order flow, the Company must be competitive on price,
size of securities positions traded, order execution, technology and customer
service. In its role as a market maker, the Company attempts to derive a
profit from the difference between the prices at which it buys and sells
securities. However, competitive forces often require the Company to match the
quotes other market makers display and to hold varying amounts of securities
in inventory. By having to maintain inventory positions, the Company is
subjected to a high degree of risk. There can be no assurance that the Company
will be able to manage such risk successfully or that it will not experience
significant losses from such activities, either of which could materially
adversely affect the Company's business, financial condition and operating
results.

ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL

The Company's future success depends, in significant part, upon the
continued service of key executive officers, managers, sales, trading and
technical personnel, particularly Kenneth D. Pasternak, the Company's
President and Chief Executive Officer. The Company has entered into employment
agreements with Mr. Pasternak and other key employees and maintains "key
person" life insurance policies on Mr. Pasternak and other key employees for
the benefit of the Company. Competition for key personnel and other highly
qualified management, sales, trading and technical personnel is intense, and
there can be no assurance that the Company will be able to retain its key
personnel or that it can attract, assimilate or retain other highly qualified
personnel in the future. The loss of the services of any of the Company's key
personnel or the inability to identify, hire, train and retain other qualified
personnel in the future could have a material adverse effect on the Company's
business, financial condition and operating results. See "Risk Factors--
Government Regulation," "Management--Employment Agreements."

The success of the Company also depends, in significant part, on the highly
skilled, and often specialized, individuals it employs. The Company's ability
to attract and retain management, sales, trading and technical professionals
is particularly important to its business strategy. The Company strives to
provide high quality services that will allow it to establish and maintain
long-term relationships with its customers. The Company's ability to do so
depends, in large part, upon the individual employees who represent the
Company in its dealings with such customers.

From time to time, other companies in the securities industry have
experienced losses of sales and trading professionals. The level of
competition to attract such professionals is intense. There can be no
assurance that the Company will not lose such professionals due to increased
competition or other factors in the future. The loss of a sales and trading
professional, particularly a senior professional with broad industry
expertise, could have a material adverse affect on the Company's business,
financial condition and operating results.

The Company expects that the number of its personnel will continue to grow,
particularly if current equity market activity continues and grows.
Competition for employees with the qualifications the Company desires is
intense, especially competition for equity trading professionals. There can be
no assurance that the Company will be able to recruit and retain a sufficient
number of new employees with the qualifications it desires in a timely manner
or that personnel costs will not increase significantly. The failure to retain
personnel or a significant increase in personnel costs could have a material
adverse effect on the Company's business, financial condition and operating
results.

RISKS ASSOCIATED WITH POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS; SEASONALITY

The Company's operating results may fluctuate significantly in the future
due to a number of factors, including the value of the Company's securities
positions and the Company's ability to manage the risks

12
<PAGE>

attendant thereto, the volume of its market-making activities, volatility in
the securities markets, its ability to manage personnel, overhead and other
expenses, the amount of revenue derived from limit orders as a percentage of
total revenues, changes in payments for order flow, clearing costs, the
addition or loss of sales and trading professionals, regulatory changes, the
amount and timing of capital expenditures, the incurrence of costs associated
with acquisitions and general economic conditions. The Company's expense
structure is based on historical expense levels and the levels of demand for
the Company's market-making services. If demand for the Company's market-
making services declines and the Company is unable to adjust its cost
structure on a timely basis, the Company's operating results could be
materially and adversely affected. The Company has experienced, and may
experience in the future, significant seasonality in its business. The Company
has historically experienced an increase in revenues in the fourth quarter of
the year, which the Company believes is due, in large part, to higher trading
volumes in the securities markets at year end. The Company believes that this
seasonal trend will continue for the foreseeable future and that the Company's
business, financial condition and operating results may be affected by such
trends in the future.

Due to all of the foregoing factors, period-to-period comparisons of the
revenues and operating results of the Company are not necessarily meaningful
and such comparisons cannot be relied upon as indicators of future
performance. There also can be no assurance that the Company will be able to
sustain the rates of revenue growth that it has experienced in the past, that
it will be able to improve its operating results or that it will be able to
sustain its profitability on a quarterly basis. In addition, the Company's
operating results in future periods may be below the expectations of
securities analysts and investors. In that event, the market price of the
Common Stock would likely be materially and adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

RISKS ASSOCIATED WITH ADVERSE ECONOMIC, POLITICAL AND MARKET CONDITIONS

The securities business generally is, by its nature, volatile. It is
directly affected by numerous national and international factors that are
beyond the Company's control, including, among others, economic, political and
market conditions; the availability of short-term and long-term funding and
capital; the level and volatility of interest rates; legislative and
regulatory changes; currency values and inflation. Any one or more of these
factors may contribute to reduced levels of activity in the securities markets
generally, which could result in lower revenues from the Company's market-
making activities. Any reduction in revenues or any loss resulting from such
factors could have a material adverse effect on the Company's business,
financial condition and operating results.

RISKS ASSOCIATED WITH DECLINES IN MARKET VOLUME, PRICE OR LIQUIDITY

The Company's revenues may decrease in the event of a decline in market
volume, prices or liquidity. Declines in the volume of securities transactions
and in market liquidity generally result in lower revenues from market-making
activities. Lower price levels of securities may also result in reduced
trading volume, and could cause a reduction in trading activity, and thereby
reduce revenues from market-making transactions, as well as losses from
declines in the market value of securities held in inventory. Sudden sharp
declines in market values of securities can result in illiquid markets,
declines in the market values of securities held in inventory, the failure of
buyers and sellers of securities to fulfill their obligations and settle their
trades and increases in claims and litigation. Any decline in market volume,
price or liquidity or any other of these factors could have a material adverse
effect on the Company's business, financial condition and operating results.

RISKS ASSOCIATED WITH MANAGEMENT OF GROWTH

Since its inception in 1995, the Company has experienced significant growth
in its business activities and the number of its employees. For example, the
Company's share volume has increased from 2.0 billion shares traded for the
quarter ended December 31, 1995 to 7.4 billion shares traded for the quarter
ended March 31, 1998 and the number of the Company's employees has increased
from 152 as of December 31, 1995 to 337 as of March 31, 1998. The growth of
the Company's business and expansion of its customer base has placed,

13
<PAGE>

and is expected to continue to place, a significant strain on the Company's
management and operations. This growth has required and will continue to
require increased investment in management personnel, financial and management
systems and controls and facilities, which, in the absence of continued
revenue growth, would cause the Company's operating margins to decline from
current levels. In addition, as is common in the securities industry, the
Company is and will continue to be highly dependent on the effective and
reliable operation of its communications and information systems. The Company
believes that its current and anticipated future growth will require
implementation of new and enhanced communications and information systems, and
training of its personnel to operate such systems. In addition, the scope of
procedures for assuring compliance with applicable rules and regulations has
changed as the size and complexity of the Company's business has increased.
The Company has implemented and continues to implement formal compliance
procedures to reflect such growth. Accordingly, the Company's future operating
results will depend on its ability to continue to improve its systems for
operations, financial control, and communication and information management;
to enhance its compliance procedures; and to recruit, train, manage and retain
its employee base. There can be no assurance that the Company will be able to
manage or continue to manage its recent or any future growth successfully. The
Company's inability to do so could materially and adversely affect the
Company's business, financial condition and operating results. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

RISKS ASSOCIATED WITH CONTROL BY LLC MEMBERS

Immediately after the Offering, the broker-dealer owners will continue to
own 48.5% of the Company and will therefore as a group be able to elect all of
the members of the Board of Directors, retain the voting power to approve all
matters requiring stockholder approval and continue to have significant
control over the affairs of the Company. Although there is no reason to
believe that the broker-dealer owners will seek to act as a group in this
manner, there can be no assurance that they will not do so.

RISKS RELATED TO CUSTOMER CONCENTRATION

A small number of customers have historically accounted for a significant
portion of the Company's market-making activities, and the Company expects a
significant portion of the future demand for its market-making services to
remain concentrated within a limited number of customers. For the year ended
December 31, 1996, the Company's five largest customers, Waterhouse
Securities, Inc., Ameritrade Inc. E*TRADE Securities, Inc., Brown and
Southwest Securities, Inc., were broker-dealer owners or subordinated note
holders and accounted for, in the aggregate, 22.3% of the Company's order
flow. For the year ended December 31, 1997 and the three months ended March
31, 1998, the Company's five largest customers, Waterhouse Securities, Inc.,
Ameritrade Inc., E*TRADE Securities, Inc., Brown and Discover Brokerage Direct
were broker-dealer owners or subordinated note holders and accounted for, in
the aggregate, 29.4% and 33.8%, respectively, of the Company's order flow.
None of these customers are contractually obligated to utilize the Company as
market maker and, accordingly, these customers may direct their trading
activities to other market makers at any time. There can be no assurance that
the Company will be able to retain these or other major customers or that such
customers will maintain or increase their demand for the Company's market-
making activities. The loss of, or a significant reduction of demand for the
Company's services from, any of these customers could have a material adverse
effect on the Company's business, financial condition and operating results.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Business--Customers."

RISKS ASSOCIATED WITH LIMITED OPERATING HISTORY

The Company began its operations in 1995 with the formation of Knight and
the acquisition of the listed securities market-making business of Trimark.
Knight, which has historically accounted for a substantial portion of the
Company's revenues, and is expected to continue to do so in the foreseeable
future, only began its operation in 1995. The Company's management has limited
experience with respect to the operations of

14
<PAGE>

Knight and in operating the Company on a consolidated basis. Accordingly, the
Company has a limited consolidated operating history upon which an evaluation
of the performance of the Company and its prospects can be based. The
Company's prospects must be considered in light of the risks, uncertainties,
expenses and difficulties frequently encountered by similarly situated
companies, particularly companies in the securities industry that are subject
to evolving regulatory, technological and customer requirements. To address
these risks, the Company must, among other things, maintain existing customer
relationships and effectively develop new relationships, respond to regulatory
and competitive developments, attract, retain and motivate qualified
personnel, and develop and upgrade its technology. There can be no assurance
that the Company will be successful in addressing such requirements. The
failure to do so could have a material adverse effect on the Company's
business, financial condition and operating results.

RISKS ASSOCIATED WITH INTELLECTUAL PROPERTY RIGHTS

The Company is heavily dependent on two order entry and execution software
systems known as the "Brass System," which it licenses from Automated
Securities Clearance, Ltd. ("ASC") and the "Appletree System," which it
licenses from TCAM Systems, Inc. ("TCAM") pursuant to license agreements.
Although the Company has rights to modify the licensed software under the
license agreements, the licensors own all modifications and enhancements to
the licensed software, and the licensors can use the modifications and
enhancements to the licensed software without the Company's consent. While the
Company does not believe that ASC or TCAM has incorporated any such
modifications in software licensed to third parties, there can be no assurance
that they will not do so in the future or that any such license will not have
a material adverse effect on the Company's competitive position. The Company
relies on ASC to monitor the daily operation of the Brass System in order to
detect problems with the Brass System's operation. The Company relies on the
licensors to support and maintain the Brass and Appletree Systems. The
licenses, and the licensors' daily operation and support obligations are
terminable if the Company breaches its obligations under the license
agreements. The failure by the Company to maintain these relationships, or to
find a replacement for such technology in a timely and cost-effective manner,
could have a material adverse effect on the Company's business, financial
condition and operating results.

The Company also licenses other software from third parties, which software
is integral to the Company's business. If any of these relationships were
terminated or if any of these third parties were to cease doing business, the
Company would be forced to spend significant time to replace the licensed
software, if possible. However, there can be no assurance that such
replacements would be available on reasonable terms, if at all. Such events
would have a material adverse effect upon the Company's business, financial
condition and operating results. In addition, litigation may be necessary in
the future to enforce the Company's intellectual property rights, to protect
the Company's trade secrets, to determine the validity and scope of the
proprietary rights of others, or to defend against claims of infringement or
invalidity. Such litigation, whether successful or unsuccessful, could result
in substantial costs and diversions of resources either of which could have a
material adverse effect on the Company's business, financial condition and
operating results. The Company may in the future receive notices of claims of
infringement of other parties' proprietary rights. There can be no assurance
that claims for infringement or invalidity (or claims for indemnification
resulting from infringement claims) will not be asserted or prosecuted against
the Company. Any such claims, with or without merit, could be time consuming
to defend, result in costly litigation, divert management's attention and
resources or require the Company to enter into royalty or licensing
agreements. There can be no assurance that such royalties or licenses would be
available on reasonable terms, if at all, and the assertion or prosecution

15
<PAGE>

of any such claims, whether successful or unsuccessful, could have a material
adverse effect on the Company's business, financial condition and operating
results. See "Business--Intellectual Property and Other Proprietary Rights."

COMPETITION

The Company derives substantially all of its revenues from market-making
activities. The market for these services, particularly market-making services
through electronic communications gateways, is rapidly evolving and intensely
competitive. The Company expects competition to continue and intensify in the
future. Knight competes primarily with wholesale, national, and regional
broker-dealers. Trimark competes with the NYSE, the AMEX, regional exchanges
and Third Market competitors. The Company competes primarily on the basis of
execution standards, its relationship with its customers and technology.

A number of the Company's competitors have significantly greater financial,
technical, marketing and other resources than the Company. Some of the
Company's competitors also offer a wider range of services and products than
the Company and have greater name recognition and more extensive customer
bases than the Company. These competitors may be able to respond more quickly
to new or evolving opportunities, technologies and customer requirements than
the Company and may be able to undertake more extensive promotional activities
and offer more attractive terms to customers. Recent advancements in computing
and communications technology are substantially changing the means by which
market-making services are delivered, including more direct access on-line to
a wide variety of services and information, and have also created demand for
more sophisticated levels of customer service. The provision of such services
may entail considerable cost without an offsetting increase in revenues.
Moreover, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties or may
consolidate to enhance their services and products. New competitors or
alliances among competitors may emerge and they may acquire significant market
share.

There can be no assurance that the Company will be able to compete
effectively with current or future competitors or that the competitive
pressures faced by the Company will not have a material adverse effect on the
Company's business, financial condition and operating results.

LITIGATION AND POTENTIAL SECURITIES LAWS LIABILITY

Many aspects of the Company's business involve substantial risks of
liability. A market maker is exposed to substantial liability under federal
and state securities laws, other federal and state laws and court decisions,
as well as rules and regulations promulgated by the SEC and the NASD. The
Company is also subject to the risk of litigation and claims that may be
without merit. As the Company intends to defend actively any such litigation,
significant legal expenses could be incurred. An adverse resolution of any
future lawsuits or claims against the Company could have a material adverse
effect on the Company's business, financial condition and operating results.

RISKS ASSOCIATED WITH DEPENDENCE ON COMPUTER AND COMMUNICATIONS SYSTEMS

The Company's market-making activities are heavily dependent on the
integrity and performance of the computer and communications systems
supporting them. Extraordinary trading volumes or other events could cause the
Company's computer systems to operate at an unacceptably low speed or even
fail. Any significant degradation or failure of the Company's computer systems
or any other systems in the trading process (e.g., on-line service providers,
record retention and data processing functions performed by third parties, and
third-party software, such as Internet browsers) could cause customers to
suffer delays in trading. Such delays could cause substantial losses for
customers and could subject the Company to claims from customers for losses,
including litigation claiming fraud or negligence. There can be no assurance
that the Company's network protections will work appropriately in the event of
a computer systems failure, or that, in the event of a tornado, fire or any
other natural disaster, power or telecommunications failure, act of God or
war, the Company will not suffer an extended computer systems failure. Any
computer or communications system failure or decrease in computer systems
performance that causes interruptions in the Company's operations could have a
material adverse effect on the Company's business, financial condition and
operating results. See "Business--Technology."

16
<PAGE>

RISKS RELATED TO EVOLVING MARKETS; DEPENDENCE ON NEW SERVICES, PRODUCTS AND
TECHNOLOGIES

The demand for market-making services, particularly services that rely on
electronic communications gateways is characterized by rapid technological
change, changing customer demands, the need to enhance existing or introduce
new services and products, and evolving industry standards. New services,
products and technologies may render the Company's existing services, products
and technologies less competitive. The Company's future success will depend,
in part, on its ability to respond to the demand for new services, products
and technologies on a timely and cost-effective basis and adapt to
technological advancements and changing standards to address the increasingly
sophisticated requirements of its customers. There can be no assurance that
the Company will be successful in the development, acquisition of adequate
rights to, introduction or marketing of such new services, products and
technologies. Any failure by the Company to anticipate or respond adequately
to technological advancements, customer requirements or changing industry
standards, or any significant delays in the development, introduction or
availability of new services, products or enhancements could have a material
adverse effect on the Company's business, financial condition and operating
results.

RISKS ASSOCIATED WITH UNCERTAINTY OF MARKET ACCEPTANCE OF NEW SERVICES,
PRODUCTS AND THE INTERNET

The Company receives substantially all of its order flow through electronic
communications gateways, including a variety of computer-to-computer
interfaces and the Internet. The market for market-making services that rely
on the Internet is at an early stage of development and is rapidly evolving.
As a result, the demand for and market acceptance of recently introduced
services and products is subject to a high level of uncertainty. The Company's
electronic services may involve alternative approaches to market making and,
accordingly, substantial marketing and sales efforts may be necessary to
educate prospective customers regarding the use and benefit of the Company's
electronic services and products.

The Company depends on the business it receives from broker-dealers who
increasingly rely on the Internet to conduct transactions with their
customers. The need for the Company's services and products depend on whether
the customers of such broker-dealers are willing to adopt the Internet as a
medium for commerce and communication. Customer concerns, including security,
reliability, cost, ease of use, accessibility and quality of service all may
negatively affect the growth of Internet use for such activities. The success
of the Internet will also depend on the development of necessary
infrastructure and complementary services and products, such as high speed
modems and high speed communication lines. As the number of users and the
amount of traffic on the Internet continues to increase, there can be no
assurance that the infrastructure needed to support the Internet will be able
to meet the demands placed on it. Finally, the success of the Internet will
also depend on government regulation and the ability of Internet users to
develop and adopt new standards and protocols to handle increased levels of
activity. As a result, there can be no assurance that the number of
transactions generated over the Internet will continue to increase. Any
reluctance of the clients of the Company's broker-dealer customers to obtain
brokerage services over the Internet may have a material adverse effect on the
Company's business, financial condition and operating results.

EFFECT OF NET CAPITAL REQUIREMENTS

The SEC, the NASD and various other regulatory agencies have stringent rules
with respect to the maintenance of specific levels of net capital by
securities brokers, including the SEC's Uniform Net Capital Rule (the "Net
Capital Rule"), which governs the net capital requirements of each of the
Company's subsidiaries. Failure to maintain the required net capital may
subject a firm to suspension or revocation of registration by the SEC and
suspension or expulsion by the NASD and other regulatory bodies and ultimately
could require the firm's liquidation. In addition, a change in the net capital
rules, the imposition of new rules or any unusually large charge against net
capital could limit those operations of the Company that require the intensive
use of capital, and also could restrict the Company's ability to withdraw
capital from its brokerage subsidiaries, which in turn could limit the
Company's ability to pay cash dividends, repay debt and repurchase shares of
its outstanding stock. A significant operating loss or any unusually large
charge against net capital could adversely affect the ability of the Company
to expand or even maintain its present levels of business,

17
<PAGE>

which could have a material adverse effect on the Company's business,
financial condition and operating results. See "Business--Government
Regulation."

YEAR 2000

Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. As a result, in less than two years, computer systems
and/or software used by many companies, including computers involved in the
securities industry, may need to be upgraded to comply with such "Year 2000"
requirements. Significant uncertainty exists concerning the potential effects
associated with the failure to achieve such compliance. The Company has
undertaken a project to identify and modify non-year 2000 compliant
communications and data processing systems in anticipation of the Year 2000.
Although the Company's main trading-related systems are designed to be Year
2000 compliant, there can be no assurance that the Company's proprietary
software and systems or any other software or systems licensed by third
parties to the Company contain all necessary date code changes or that it will
not be adversely affected by the failure of other companies' software to be
Year 2000 compliant. The Company plans to have its other computer systems
certified by the end of 1998. However, there can be no assurance that such
schedule will be met or that any software or systems licensed by third parties
to the Company, on which the Company's business is dependent, will be
corrected in a timely manner or that any such failure by such third parties
would not disrupt the Company's ability to accurately communicate with its
customers or its customers' ability to utilize the Company's services. Any
such disruption or failure could have an adverse effect on the Company's
business, financial condition and operating results. There can be no assurance
that third parties will not commence litigation against the Company for any
such disruption or failure.

ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF DELAWARE LAW AND THE COMPANY'S
CHARTER

The Company is organized under the laws of the State of Delaware. Certain
provisions of Delaware law may have the effect of delaying, deferring, or
preventing a change in control of the Company. In addition, certain provisions
of the Company's Certificate of Incorporation (the "Certificate") may be
deemed to have anti-takeover effects and may delay, defer or prevent a
takeover attempt that a stockholder might consider in its best interest. The
Certificate will authorize the Board to determine the rights, preference,
privileges and restrictions of unissued series of preferred stock and to fix
the number of shares of any series of preferred stock and the designation of
any such series, without any vote or action by the Company's stockholders.
Thus, the Board can authorize and issue shares of preferred stock with voting
or conversion rights that could adversely affect the voting or other rights of
holders of the Company's Common Stock. In addition, the issuance of preferred
stock may have the effect of delaying, deferring, or preventing a change of
control of the Company, as the terms of the preferred stock that might be
issued could potentially prohibit the Company's consummation of any merger,
reorganization, sale of substantially all of its assets, liquidation or other
extraordinary corporate transaction without the approval of the holders of the
outstanding shares of the Common Stock.

SUBSTANTIAL DISCRETION IN USE OF PROCEEDS

The company intends to use $13.8 million of the net proceeds from the
Offering to pay for the redemption of the Class B Preferred Units of the LLC.
The Company intends to use the balance of the net proceeds for working capital
and for general corporate purposes. Accordingly, management will have
significant flexibility in applying the net proceeds of the Offering. Although
the Company has no plans, commitments or agreements regarding any material
acquisitions as of the date of this Prospectus, the Company may seek
acquisitions of businesses, products or technologies that are complementary to
those of the Company, and a portion of the net proceeds may be used for such
acquisitions. See "Use of Proceeds."

NO PRIOR MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offering, there was no public market for the Company's Class A
Common Stock. The Company has applied to have the Class A Common Stock
approved for quotation in NASDAQ as a National

18
<PAGE>

Market issue under the symbol "NITE." There can be no assurance that an active
public market for the Class A Common Stock will develop or be sustained. The
initial public offering price will be determined through negotiations between
the Company and the representatives of the Underwriters, and it may not be
indicative of the market price for the Class A Common Stock after the Offering
is complete. The market price of the Class A Common Stock after completion of
the Offering could be subject to significant fluctuations in response to
quarterly variations in operating results, announcements of new services or
products by the Company or its competitors, changes in financial estimates by
securities analysts or other vents or factors many of which are beyond the
Company's control. In addition, stock markets generally, and the stock prices
of competitors in the Company's industry specifically, experience significant
price and volume volatility from time to time which may adversely affect the
market price of the Class A Common Stock for reasons unrelated to the
Company's performance. There can be no assurance that purchasers of Class A
Common Stock will be able to resell their Class A Common Stock at prices equal
to or greater than the initial public offering price. See "Underwriting."

IMMEDIATE SUBSTANTIAL DILUTION

Purchasers of Class A Common Stock in the Offering will experience an
immediate and substantial dilution of $12.29 in the net tangible book value
per share of their investment. If the Company issues additional Common Stock
in the future, purchasers of Class A Common Stock in the Offering may
experience further dilution in the net tangible book value of their Class A
Common Stock. See "Dilution." The Company does not anticipate paying any cash
dividends on its Common Stock in the foreseeable future. See "Dividend
Policy."

FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING

The Company's business is dependent upon the availability of adequate
funding and regulatory capital under applicable regulatory requirements.
Historically, the Company has satisfied these needs from internally generated
funds. Prior to the Reorganization, the LLC will pay a portion of its
undistributed profits to its members, thereby reducing the Company funds
available for business operations. The Company currently anticipates, based on
management's experience and current industry trends, that its available cash
resources, combined with the net proceeds to the Company from the Offering,
will be sufficient to meet its presently anticipated working capital and
capital expenditure requirements for at least the next 12 months. The Company
expects that it will incur approximately $8.0 million in capital expenditures
in 1998. However, if the Company needs to raise additional funds to support
more rapid expansion, develop new or enhanced services and products, respond
to competitive pressures, acquire complementary businesses, products or
technologies or respond to unanticipated requirements, there can be no
assurance that additional financing will be available when needed on terms
favorable to the Company. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity."

SHARES ELIGIBLE FOR FUTURE SALE

Upon consummation of the Offering, the Company will have 47,484,299 shares
of Class A Common Stock and 3,945,528 shares of Class B Common Stock
outstanding. Of these shares, the shares of Class A Common Stock offered
hereby will be freely tradeable without restriction or further registration
under the Securities Act, by persons other than affiliates of the Company
within the meaning of Rule 144 promulgated under the Securities Act. The
remaining shares, other than shares held by affiliates, may also be freely
tradeable. 41,429,827 of these shares are held by affiliates and, accordingly,
are "restricted securities" as that term is defined in Rule 144 under the
Securities Act and may be sold only if registered or pursuant to an exemption
from registration.

In addition, the existing stockholders have the right to cause the Company
to register the sale of certain shares of Class A Common Stock or Class B
Common Stock owned by them and/or to include their shares in future
registrable statements relating to the Company's securities.

19
<PAGE>

Each of the Company, its directors and officers and certain other
stockholders has agreed that it will not offer, sell, contract to sell,
announce its intention to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the SEC a registration statement under the Securities
Act relating to, any additional shares of the Class A Common Stock or
securities convertible into or exchangeable or exercisable for any shares of
the Class A Common Stock without the prior written consent of BancAmerica
Robertson Stephens for a period of 180 days after the date of this Prospectus.
See "Shares Eligible for Future Sale" and "Underwriting."

After the date of this Prospectus, the Company intends to file a Form S-8
registration statement under the Securities Act to register all shares of
Common Stock issuable under the Company's stock option plan. Such registration
statement is expected to become effective immediately upon filing, and shares
covered by that registration statement will thereupon be eligible for sale in
the public markets, subject to certain lock-up agreements and Rule 144
limitations applicable to affiliates. See "Management," "Description of
Capital Stock--Registration Rights," "Shares Eligible for Future Sale" and
"Underwriting."

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 8,688,246 shares of
Class A Common Stock offered by the Company hereby are estimated to be
approximately $120.4 million ($141.4 million if the Underwriters' over-
allotment option is exercised in full) at an assumed initial public offering
price of $15.00 per share after deducting underwriting discounts and
commissions and estimated offering expenses payable by the Company. The
Company will not receive any proceeds from the sale of Class A Common Stock by
the Selling Stockholder. See "Principal and Selling Stockholders."

The principal purposes of the Offering are to increase the Company's working
capital and equity base, to provide a public market for its Class A Common
Stock, to permit future acquisitions using cash or publicly- tradeable Class A
Common Stock, and to facilitate future access to capital markets. From the
proceeds of the Offering, the Company intends to use $13.8 million to pay for
the redemption of all of the outstanding Preferred B Units of the LLC. The
Company intends to dissolve the LLC immediately after the Reorganization. The
redemption of the Preferred B Units will be required at that time. The Company
intends to use the remaining proceeds of the Offering for working capital and
for general corporate purposes. The Company may also use a portion of the
proceeds of the Offering to pursue acquisitions of or investments in
businesses, products or technologies that are complementary to those of the
Company. The Company currently does not have any commitments or agreements
with respect to any such acquisitions. Pending such uses, the Company intends
to invest the net proceeds of the Offering in short-term, investment-grade,
interest-bearing securities.

DIVIDEND POLICY

Prior to the Reorganization, the LLC has been treated as a partnership for
federal and state income tax purposes. Since inception, the LLC generated
taxable income and made distributions to its members to facilitate the payment
of the tax liability associated with the allocation of LLC income of an
aggregate of $2.9 million, $17.6 million, $22.3 million and $8.4 million in
1995, 1996, 1997, and the three months ended March 31, 1998, respectively. In
addition, prior to the Reorganization, the LLC will distribute to its members
all of its Undistributed Profits (other than $26.1 million which certain LLC
members have elected not to have distributed and to receive in exchange
therefor additional shares of Common Stock), as well as all of its taxable
income earned during the period beginning April 1, 1998 and ending with the
closing of the Offering. See "Certain Transactions--The Reorganization."

The Company intends to retain future earnings, if any, to finance the
development and expansion of its business and, therefore, does not anticipate
paying any cash dividends on its Common Stock in the foreseeable future. The
payment of cash dividends is within the discretion of the Company's Board of
Directors and will be dependent upon, among other factors, the Company's
results of operations, financial condition and capital requirements,
restrictions imposed by the Company's financing arrangements and legal
requirements.

20
<PAGE>

CAPITALIZATION

The following table sets forth as of March 31, 1998, (i) the actual
capitalization of the Company, (ii) the pro forma capitalization of the
Company after giving effect to the Reorganization, the exercise of the Brown
Option and the redemption of the Preferred A Units and a portion of the
Preferred B Units and (iii) the as adjusted capitalization of the Company
after giving effect to the sale by the Company of 8,688,246 shares of Class A
Common Stock at an assumed initial public offering price of $15.00 per share
and the application of the estimated net proceeds therefrom. See "Use of
Proceeds." This table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and Notes thereto appearing elsewhere in
this Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------------------------
PRO FORMA
ACTUAL PRO FORMA (3) AS ADJUSTED (4)
------- ------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt:
Mandatorily Redeemable Preferred
Units.......................... $13,847(1) $13,847 $ --
Owners' equity:
Common Units (5)................ 7,345 -- --
Preferred Stock, $0.01 par val-
ue; 20,000,000 shares autho-
rized; no shares issued and
outstanding, actual, pro forma,
or as adjusted................. -- -- --
Class A Common Stock, $0.01 par
value; 200,000,000 shares au-
thorized; no shares issued and
outstanding, actual; 38,796,053
shares issued and outstanding,
pro forma; 47,484,299 shares
issued and outstanding, as ad-
justed (2)(5).................. -- 388 475
Class B Common Stock, $0.01 par
value; 20,000,000 shares autho-
rized; no shares issued and
outstanding, actual; 3,945,528
shares issued and outstanding,
pro forma; and 3,945,528 shares
issued and outstanding, as ad-
justed (5)..................... -- 39 39
Additional paid-in capital...... -- 33,113 153,379
Undistributed income............ 52,645 -- --
------- ------- --------
Total owners' equity.......... 59,990 33,540 153,893
------- ------- --------
Total capitalization......... $73,837 $47,387 $153,893
======= ======= ========
</TABLE>
- --------
(1) In April 1998, the Company redeemed and retired all of the Preferred A
Units for $12.5 million and a portion of the Preferred B Units for $1.2
million (the "Redemption") pursuant to mandatory redemption provisions.
(2) Does not include outstanding options to purchase a total of shares of
Class A Common Stock issuable at an exercise price equal to the initial
public offering price as of the date of this Prospectus. As of the date of
this Prospectus, an additional 7,409,000 shares were reserved for future
grants under the Company's stock option plans.

(3) Pro forma to give effect to the Reorganization, the exercise of the Brown
Option and the redemption of the Preferred A Units and a portion of the
Preferred B Units. See Note 16, "Proposed Reorganization of the Company
(Unaudited)," to the consolidated financial statements on pages F-19 and
F-20.

(5) The following table summarizes the Common Units, Class A Common Stock and
Class B Common Stock activity as a result of the Reorganization, the Brown
Option and the Offering. See "Certain Transactions."

<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON COMMON COMMON
UNITS STOCK STOCK
-------- ---------- ---------
<S> <C> <C> <C>
Beginning Balances--March 31, 1998........... 734,497 -- --
Conversion of Common Units into Class A and
Class B Common Stock of the Company........ (734,497) 36,659,585 3,945,528
Exercise of Brown Option.................... -- 394,887 --
Investment of Undistributed Income in
shares of Class A Common Stock from Offer-
ing........................................ -- 1,741,581 --
-------- ---------- ---------
Pro Forma Total........................... -- 38,796,053 3,945,528
Offering.................................... -- 8,688,246 --
-------- ---------- ---------
Pro Forma As Adjusted Total............... -- 47,484,299 3,945,528
======== ========== =========
</TABLE>

21
<PAGE>

DILUTION

The pro forma net tangible book value of the Company as of March 31, 1998,
giving effect to the Reorganization, Option Exercise and the Redemption, was
$19.1 million or $0.45 per share. Pro forma net tangible book value per share
represents the amount of total tangible assets less total liabilities, divided
by the number of shares of Common Stock outstanding. After giving effect to
the sale of 8,688,246 shares of Class A Common Stock offered by the Company
hereby (at an assumed initial public offering price of $15.00 per share and
after deducting underwriting discounts and commissions and estimated offering
expenses), the pro forma as adjusted net tangible book value of the Company as
of March 31, 1998 would have been approximately $139.5 million or $2.71 per
share. This represents an immediate dilution of $12.29 per share to new
investors in this Offering. The following table illustrates this per share
dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............... $15.00
Pro forma net tangible book value per share as of March 31,
1998....................................................... $0.45
Increase per share attributable to new investors............ 2.26
-----
Pro forma as adjusted net tangible book value per share after
this Offering................................................ 2.71
------
Dilution per share to new investors........................... $12.29
======
</TABLE>

The following table summarizes, on a pro forma basis as of March 31, 1998,
(i) the number of shares of Common Stock purchased from the Company, (ii) the
total consideration paid for such shares and (iii) the average price per share
paid by existing stockholders and by new stockholders:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ -------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders
(1).................... 42,741,581 83.1% $ 33,540,119 20.5% $0.78
New stockholders........ 8,688,246 16.9 130,323,690 79.5 15.00
---------- ----- ------------ -----
Total................. 51,429,827 100.0% $163,863,809 100.0%
========== ===== ============ =====
</TABLE>
- --------
(1) Sales by the Selling Stockholder in this offering will cause the number of
shares held by existing stockholders to be reduced to 41,429,827 shares or
80.6% (41,429,827 shares or 78.3% if the Underwriters' over-allotment
option is exercised in full) of the total number of shares of Common Stock
to be outstanding after this Offering, and will increase the number of
shares held by new investors to 10,000,000 shares or 19.4% (11,500,000
shares or 21.7% if the Underwriters' over-allotment option is exercised in
full) of the total number of shares of Common Stock to be outstanding
after this Offering. See "Principal and Selling Stockholders."

The calculation of pro forma net tangible book value and the other
computations above assume no exercise of stock options outstanding, except for
the Option Exercise. As of the date of this Prospectus, there were options
outstanding to purchase a total of shares of Class A Common Stock at an
exercise price equal to the initial public offering price. See
"Capitalization," "Management--Executive Compensation," "Description of
Capital Stock" and "Shares Eligible for Future Sale."

22
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data are qualified by the more
detailed consolidated financial statements of the Company and the notes
thereto included elsewhere in this Prospectus and should be read in
conjunction with such consolidated financial statements and notes and the
discussion under "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Prospectus. The
consolidated statement of income data for the period from March 27, 1995
through December 31, 1995 and years ended December 31, 1996 and 1997 and the
consolidated statement of financial condition data at December 31, 1996 and
1997 have been derived from the Company's audited consolidated financial
statements included elsewhere in this Prospectus. The consolidated statement
of financial condition data at December 31, 1995 are derived from audited
consolidated financial statements not included in this Prospectus. The
consolidated statement of income data for the three months ended March 31,
1997 and 1998 and the consolidated statement of financial data at March 31,
1998 are derived from the unaudited consolidated financial statements which,
in the opinion of management, have been prepared on the same basis as the
audited consolidated financial statements and contain all adjustments,
consisting only of normal recurring accruals, necessary for a fair
presentation of the results of operations for such periods. The results of
operations for the three months ended March 31, 1998 are not necessarily
indicative of results to be expected for the full year.

<TABLE>
<CAPTION>
PERIOD FROM
MARCH 27, THROUGH YEAR ENDED THREE MONTHS
DECEMBER 31, DECEMBER 31, ENDED MARCH 31,
----------------- ----------------- ---------------
1995 1996 1997 1997 1998
----------------- -------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
INCOME DATA:
Revenues
Net trading revenue..... $69,516 $183,894 $224,627 $50,483 $63,007
Interest, net........... 296 1,283 2,039 496 526
------- -------- -------- ------- -------
Total revenues........ 69,812 185,177 226,666 50,979 63,533
------- -------- -------- ------- -------
Expenses
Payments for order
flow................... 25,994 69,829 66,912 18,129 16,257
Execution and clearance
fees................... 12,710 25,837 32,069 6,411 10,241
Employee compensation
and benefits........... 12,151 39,494 57,717 12,013 16,168
Communications and data
processing............. 2,202 4,360 6,809 1,319 2,170
Depreciation and amorti-
zation................. 1,626 2,975 4,225 936 1,291
Interest on Preferred
Units.................. 1,310 2,093 1,941 604 416
Occupancy and equipment
rentals................ 849 1,777 2,657 537 1,082
Business development.... 130 624 1,460 245 377
Other................... 1,499 1,428 2,799 365 747
------- -------- -------- ------- -------
Total expenses........ 58,471 148,417 176,589 40,559 48,749
------- -------- -------- ------- -------
Income before income tax-
es....................... 11,341 36,760 50,077 10,420 14,784
Pro forma income tax ex-
pense(1)................. 5,217 15,807 21,533 4,481 6,357
------- -------- -------- ------- -------
Pro forma net income...... $ 6,124 $ 20,953 $ 28,544 $ 5,939 $ 8,427
======= ======== ======== ======= =======
Pro forma basic and di-
luted earnings per
share.................... $ 0.67 $ 0.20
======== =======
Shares used to compute per
share data(2)............ 42,742 42,742
======== =======
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------- ---------
1995 1996 1997 1998
------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF FINANCIAL
CONDITION DATA:
Cash and cash equivalents................. $ 1,668 $ 15,353 $ 13,797 $ 5,429
Securities owned, at market value......... 33,763 46,781 61,726 63,490
Receivable from clearing brokers.......... 11,437 23,156 30,152 78,119
Total assets.............................. 65,182 106,035 127,872 171,073
Securities sold, not yet purchased, at
market value............................. 11,001 19,021 21,061 54,581
Distributions on Common Units payable to
members.................................. -- 4,984 8,405 8,767
Mandatorily Redeemable Preferred Units.... 28,415 37,706 27,484 27,484
Owners' equity............................ 12,199 29,987 53,973 59,990
</TABLE>
- -------
(1) Prior to the Reorganization described elsewhere in this Prospectus, the
Company was a limited liability company and was not subject to
income taxes. Pro forma income tax expense has been presented for each of
the periods indicated as if the Reorganization had occurred as of March
27, 1995.

23
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

OVERVIEW

The Company is a leading market maker in NASDAQ securities, other OTC equity
securities, and NYSE- and AMEX- listed equity securities in the Third Market.
Through its wholly-owned subsidiary, Knight, the Company makes markets in
approximately 4,200 equity securities in NASDAQ and on the NASD's OTC Bulletin
Board. Through its wholly-owned subsidiary, Trimark, the Company makes markets
in all NYSE- and AMEX-listed equity securities in the Third Market.

Knight commenced NASDAQ and OTC securities market-making operations on July
24, 1995. Based on rankings published by AutEx, an electronic database and
online, real-time network for trade order indications used by the securities
industry, Knight was ranked first in AutEx's NASDAQ/OTC Securities rankings,
with a 8.95% and 9.93% market share, respectively, during February and March
1998. Knight's share volume totaled 1.1 billion, 5.7 billion and 11.2 billion,
or 23%, 53% and 62% of the Company's total share volume, during the period
from March 27, 1995 through December 31, 1995 and the years ended December 31,
1996 and 1997, respectively. For the three months ended March 31, 1998,
Knight's share volume grew 161% to 5.0 billion, or 67% of the Company's total
share volume, from 1.9 billion shares, or 56% of the Company's total share
volume, in the same period in 1997. Since commencing operations in 1995,
Knight's business has grown rapidly and accounted for 76%, 75% and 77% of the
Company's total share volume growth during the years ended December 31, 1996
and 1997, and the three months ended March 31, 1998, respectively.

Trimark commenced operations on March 27, 1995 when it acquired the NYSE-
and AMEX-listed equity securities market-making business and certain assets of
Trimark Securities, Inc. for $15 million in Mandatorily Redeemable Preferred B
Units and additional consideration based on Trimark's earnings during the five
years immediately following the acquisition. On November 17, 1997, Trimark
purchased the business and certain of the assets of Tradetech Securities, L.P.
("Tradetech"), a direct competitor of Trimark, for $750,000 in cash and
additional consideration based on Trimark's earnings during a minimum of three
years immediately following the acquisition. Since March, 1995, Trimark has
experienced significant increases in share volumes. Trimark's share volume
totaled 3.7 billion, 5.1 billion and 6.9 billion, or 77%, 47% and 38% of the
Company's total share volume during the period from March 27, 1995 through
December 31, 1995 and the years ended December 31, 1996 and 1997,
respectively. With the acquisition of Tradetech, Trimark's share volume grew
63% for the three months ended March 31, 1998 to 2.4 billion shares, from 1.5
billion shares for the comparable period in 1997 and accounted for 33% of the
Company's share volume for the three months ended March 31, 1998.

The Company was organized in April 1998 for the purpose of succeeding to the
business of the LLC. Concurrent with the closing of the Offering, based on an
assumed initial public offering price of $15.00 per share, all of the member
interests of the LLC will be exchanged for 36,659,585 shares of Class A Common
Stock of the Company and 3,945,528 shares of Class B Common Stock of the
Company. Certain members, who have so elected, will receive additional shares
of Class A Common Stock valued at the initial public offering price with
respect to their share of the Undistributed Profits. Management of the Company
has elected to receive shares of Class A Common Stock for all of its
Undistributed Profits. The Company will receive no additional consideration in
connection with such conversion of member interests into shares of Common
Stock. In connection with the exchange, Knight will become the successor
entity to Knight Securities, L.P., and Trimark will become the successor
entity to Trimark Securities, L.P. Prior to the effective date of the
Registration Statement of which this Prospectus is a part, certain members of
the LLC, who have so elected, will receive a cash distribution of all or a
portion of their Undistributed Profits. Concurrently with such distribution,
the LLC intends to make a cash distribution to each member of an estimate of
its share of the total amount of profits of the LLC accruing between April 1,
1998 and the closing of this Offering.

24
<PAGE>

Immediately prior to the Reorganization, 60% of the member interests of the
LLC will be owned by a consortium of 27 broker-dealers or their affiliates.
Additionally, Brown & Company Securities Corporation ("Brown"), a major
customer of the Company, held subordinated debt of the LLC and an option to
purchase a member interest in the LLC (the "Brown Option"). After the closing
of this Offering, such broker-dealer owners, including Brown, will own 48.5%
of the Company's Common Stock (47.2% if the Underwriters' over-allotment
option is exercised in full). For the period from March 27, 1995 through
December 31, 1995, the years ended December 31, 1996 and 1997, and the three
months ended March 31, 1998, the broker-dealer owners and subordinated note
holders, were the source of 31.3%, 35.1%, 39.8%, and 41.3%, respectively of
the Company's total order flow. For the period from March 27, 1995 through
December 31, 1995, the years ended December 31, 1996 and 1997 and the three
months ended March 31, 1998, aggregate payments by the Company to its broker-
dealer owners and subordinated note holders for order flow and aggregate
profit distributions to broker-dealer owners equaled $14.4 million and $1.7
million, $46.4 million and $10.6 million, $50.7 million and $13.4 million,
$11.3 million and $5.0 million, respectively. See "Certain Transactions."

Revenues

The Company's revenues consist principally of net trading revenue from
market-making activities and, to a much lesser extent, net interest income
from the Company's cash and securities positions held at banks and in trading
accounts at clearing brokers. To date, the Company has only traded equity
securities, and has never traded in options, futures, forwards, swaps or other
derivative instruments. Net trading revenue, which represents trading gains
net of trading losses, is primarily affected by changes in trade and share
volumes from customers, the Company's ability to derive trading gains by
taking proprietary positions to facilitate customer transactions and, most
recently, by regulatory changes, and evolving industry customs and practices.
These regulatory changes and the move from securities being quoted in
sixteenths rather than eighths of a dollar have resulted in a decrease in net
trading revenue per trade. The Company's net trading revenue per trade for OTC
securities has historically exceeded the net revenue per trade for listed
securities.

Interest, net includes interest earned on cash balances held at banks and
clearing brokers, net of transaction-related interest charged by clearing
brokers for facilitating the settlement and financing of securities sold, not
yet purchased, and interest on subordinated notes. Interest, net is primarily
affected by the changes in cash balances held at banks and clearing brokers,
and the level of securities sold, not yet purchased, and the principal amount
outstanding under the subordinated notes.

Expenses

The Company's operating expenses largely consist of payments for order flow,
execution and clearance fees and employee compensation and benefits. A
substantial portion of these expenses are variable in nature. Payments for
order flow fluctuate based on share volume, the mix of market orders and limit
orders and the mix of orders received from broker-dealers compared to other
institutional customers. Execution and clearance fees fluctuate primarily
based on changes in trade and share volume, the mix of trades of OTC
securities compared to listed securities and the clearance fees charged by
clearing brokers. Employee compensation and benefits expense, which is largely
profitability based, fluctuates, for the most part, based on changes in net
trading revenue and the Company's profitability.

25
<PAGE>

Payments for order flow represent customary payments to broker-dealers, in
the normal course of business, for directing their order flow to the Company.
The Company does not pay for order flow from non-broker-dealer customers. As a
result of the new Order Handling Rules implemented by the SEC in 1997, the
Company changed its order flow payment policy from paying broker-dealers for
substantially all order executions, to paying broker-dealers only for orders
which provide the Company with a profit opportunity. For example, the Company
makes payments on market orders, but does not pay on limit orders. As a result
of these changes, the average order flow payment per transaction has declined.

Execution and clearance fees primarily represent clearance fees paid to
clearing brokers for OTC and listed securities, transaction fees paid to
NASDAQ for OTC securities, and execution fees paid to third parties, primarily
for executing trades in listed securities on the NYSE and AMEX and for
executing orders through Electronic Communications Networks ("ECNs").
Execution and clearance fees are higher for listed securities than for OTC
securities. Due to the Company's significant growth in share and trade volume,
the Company has been able to negotiate favorable rates and volume discounts
from clearing brokers and providers of execution services. As a result of
these lower rates and discounts and the increase in trade volume of OTC
securities as a percentage of total trade volume, execution and clearance fees
per trade have decreased.

Employee compensation and benefits expense primarily consists of salaries
and wages paid to administrative and customer service personnel and
profitability based compensation, which includes compensation and benefits
paid to market-making and sales personnel based on their individual
performance, and incentive compensation paid to all other employees based on
the overall profitability of the Company ("Profitability Based Compensation").
Profitability Based Compensation represented 65%, 79% and 78% of total
employee compensation and benefits expense for the period from March 27, 1995
through December 31, 1995 and the years ended December 31, 1996 and 1997,
respectively. Profitability Based Compensation represented 78% and 72% of
employee compensation and benefits expense for the three months ended March
31, 1997 and 1998, respectively. The Company has grown from 152 employees at
December 31, 1995 to 195 employees, 317 employees and 337 employees as of
December 31, 1996, 1997 and March 31, 1998, respectively. More than 70% of the
Company's employees are directly involved in market-making, sales or customer
service activities.

Communications and data processing expense primarily consists of costs for
obtaining stock market data and telecommunications services.

Depreciation and amortization expense results from the depreciation of fixed
assets purchased by the Company or financed under a capital lease, and the
amortization of goodwill, which includes contingent consideration, resulting
from the acquisition of the listed securities market-making business of
Trimark and the Tradetech acquisition.

Interest on Preferred Units expense represents required interest payments on
the Company's Mandatorily Redeemable Preferred A and B Units at a rate
approximating the Federal Funds rate. As of April 15, 1998, all outstanding
Preferred A Units have been redeemed and the Company has redeemed $1.2 million
of Preferred B Units. The Company intends to redeem all of the remaining
Preferred B Units for $13.8 million with the proceeds of this Offering.

Occupancy and equipment rentals expense primarily consists of rental
payments on office and equipment leases.

Business development expense primarily consists of marketing expenses,
including travel and entertainment expenses and promotion and advertising
costs.

Other expenses primarily consist of fees paid to computer programming and
systems consultants, as well as legal fees and other professional fees.

26
<PAGE>

Income Tax

Prior to the Reorganization, the Company was a limited liability company and
was not subject to federal or state income taxes. Subsequent to the
Reorganization, which will occur concurrently with the consummation of this
Offering, the Company will be subject to federal income taxes and state income
taxes in New York, New Jersey and other states. Income tax expense includes
pro forma amounts relating to federal income taxes, as well as pro forma
amounts relating to state income taxes in New York, New Jersey and other
states. The Company's pro forma effective tax rate will generally differ from
the federal statutory rate of 35% primarily due to state income taxes, as well
as the effect of nondeductible expenses, including the amortization of
goodwill resulting from the acquisition of the listed securities market-making
business of Trimark and the Tradetech acquisition and a portion of business
development expenses.

RESULTS OF OPERATIONS

The following table sets forth the consolidated statement of income data for
the periods indicated as a percentage of total revenues:

<TABLE>
<CAPTION>
PERIOD FROM THREE MONTHS
MARCH 27 THROUGH YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 31,
---------------- -------------- --------------
1995 1996 1997 1997 1998
---------------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Revenues
Net trading revenue......... 99.6% 99.3% 99.1% 99.0% 99.2%
Interest, net............... 0.4 0.7 0.9 1.0 0.8
----- ------ ------ ------ ------
Total revenues............ 100.0 100.0 100.0 100.0 100.0
----- ------ ------ ------ ------
Expenses
Payments for order flow..... 37.2 37.7 29.5 35.6 25.6
Execution and clearance
fees....................... 18.2 14.0 14.1 12.6 16.1
Employee compensation and
benefits................... 17.4 21.3 25.5 23.6 25.4
Communications and data
processing................. 3.2 2.4 3.0 2.6 3.4
Depreciation and amortiza-
tion....................... 2.3 1.6 1.9 1.8 2.0
Interest on Preferred
Units...................... 1.9 1.1 0.9 1.2 0.7
Occupancy and equipment
rentals.................... 1.2 1.0 1.2 1.1 1.7
Business development........ 0.2 0.3 0.6 0.5 0.6
Other....................... 2.1 0.8 1.2 0.7 1.2
----- ------ ------ ------ ------
Total expenses............ 83.7 80.2 77.9 79.7 76.7
----- ------ ------ ------ ------
Income before income taxes.... 16.3 19.8 22.1 20.3 23.3
Pro forma income tax expense.. 7.5 8.5 9.5 8.8 10.0
----- ------ ------ ------ ------
Pro forma net income.......... 8.8% 11.3% 12.6% 11.5% 13.3%
===== ====== ====== ====== ======
</TABLE>

THREE MONTHS ENDED MARCH 31, 1998 AND 1997

Revenues

Net trading revenue increased 24.8% to $63.0 million for the three months
ended March 31, 1998, from $50.5 million for the comparable period in 1997.
This increase was primarily due to higher trading volume, particularly higher
trade volume for OTC securities, which was offset in part by lower average net
trading revenue per trade. Total trade volume increased 100.3% to 7.6 million
trades for the three months ended March 31, 1998, from 3.8 million trades for
the comparable period in 1997. Total share volume increased 118.3% to 7.4
billion shares traded for the three months ended March 31, 1998, from 3.4
billion shares traded for the comparable period in 1997. Average net trading
revenue per trade decreased 37.7% to $8.32 per trade for the three months
ended March 31, 1998, from $13.36 per trade for the comparable period in 1997.
The

27
<PAGE>

decrease in average net trading revenue per trade was primarily due to the new
Order Handling Rules, which were implemented between January 1997 and October
1997, and, to a lesser extent, the move to securities being quoted in
sixteenths of a dollar rather than eighths of a dollar.

Interest, net increased 6.1% to $526,000 for the three months ended March
31, 1998, from $496,000 for the comparable period in 1997. This increase was
primarily due to larger cash balances held at banks and the Company's clearing
brokers, which was offset, in part, by increased transaction-related interest
expense resulting from a higher level of securities sold, not yet purchased.

Expenses

Payments for order flow decreased 10.3% to $16.3 million for the three
months ended March 31, 1998, from $18.1 million for the comparable period in
1997. As a percentage of net trading revenue, payments for order flow
decreased to 25.8% for the three months ended March 31, 1998, from 35.9% for
the comparable period in 1997. The decrease in payments for order flow on a
dollar basis and as a percentage of total revenue resulted from changes in the
Company's order flow payment policy, changes in the mix of market orders
versus limit orders, and changes in customer mix. Payments for order flow made
to broker-dealer owners and subordinated note holders represented 69.6% of
total payments for order flow for the three months ended March 31, 1998, as
compared to 78.9% for the comparable period in 1997 due to the expansion of
the Company's broker-dealer customer base.

Execution and clearance fees increased 59.7% to $10.2 million for the three
months ended March 31, 1998, from $6.4 million for the comparable period in
1997. As a percentage of net trading revenue, execution and clearance fees
increased to 16.3% of net trading revenue for the three months ended March 31,
1998, from 12.7% of net trading revenue for the comparable period in 1997. The
increase on a dollar basis was primarily due to a 100.3% increase in trades
for the comparable period in 1997, which was offset, in part, by a decrease in
clearance rates charged by clearing brokers and higher growth in the volume of
OTC securities transactions, which have lower execution costs than
transactions in listed securities. The increase in execution and clearance
fees as a percentage of net trading revenue was primarily due to the decrease
in the average net trading revenue per trade.

Employee compensation and benefits expense increased 34.6% to $16.2 million
for the three months ended March 31, 1998, from $12.0 million for the
comparable period in 1997. As a percentage of net trading revenue, employee
compensation increased to 25.7% of net trading revenue for the three months
ended March 31, 1998, from 23.8% of net trading revenue for the comparable
period in 1997. The increase on a dollar basis and as a percentage of net
trading revenue was primarily due to the Company's increased profitability and
an increase in the number of employees. Due to increased net trading revenue
and profitability, Profitability Based Compensation increased 24.8% to $11.6
million for the three months ended March 31, 1998, from $9.3 million for the
comparable period in 1997. The number of employees increased to 337 employees
as of March 31, 1998, from 228 employees as of March 31, 1997.

Communications and data processing expense increased 64.5% to $2.2 million
for the three months ended March 31, 1998, from $1.3 million for the
comparable period in 1997. This increase was generally attributable to higher
trading volumes, and an increase in the number of employees.

Depreciation and amortization expense increased 37.9% to $1.3 million for
the three months ended March 31, 1998, from $936,000 for the comparable period
in 1997. This increase was primarily due to the purchase of additional fixed
assets and leasehold improvements during 1997 and the first quarter of 1998 to
support the Company's expanded operations, and, to a lesser extent, the
amortization of goodwill recognized as part of the Tradetech acquisition,
which was completed in November 1997.

Interest on Preferred Units expense decreased 31.0% to $416,000 for the
three months ended March 31, 1998, from $604,000 for the comparable period in
1997. This decrease was primarily due to the redemption and retirement of
$10.2 million Preferred A Units by the Company in April 1997.

28
<PAGE>

Occupancy and equipment rental expense increased 101.5% to $1.1 million for
the three months ended March 31, 1998, from $537,000 for the comparable period
in 1997. This increase was primarily attributable to additional office space
and increased computer equipment lease expense. The Company occupied 75,768
square feet of office space at March 31, 1998, up from 47,598 square feet of
office space at March 31, 1997.

Business development expense increased 54.2% to $377,000 for the three
months ended March 31, 1998, from $244,000 for the comparable period in 1997.
This increase was primarily the result of higher travel and entertainment
costs.

Other expenses increased 104.6% to $747,000 for the three months ended March
31, 1998, from $365,000 for the comparable period in 1997. This was the result
of increased fees for computer programming and systems consultants.

Income Tax

Pro forma income tax expense was determined using an effective tax rate of
43% for the three months ended March 31, 1998 and 1997.

YEAR ENDED DECEMBER 31, 1997 AND 1996

Revenues

Net trading revenue increased 22.2% to $224.6 million in 1997, from $183.9
million in 1996. This increase was primarily due to higher trading volume,
particularly higher trade volume for OTC securities, which was offset in part
by lower average net revenue per trade. Total trade volume increased 74.7% to
20.3 million trades in 1997, from 11.6 million trades in 1996. Total share
volume increased 68.5% to 18.1 billion shares traded in 1997, from 10.8
billion shares traded in 1996. Average net revenue per trade decreased 30.1%
to $11.09 per trade in 1997, from $15.86 per trade in 1996, principally as a
result of the new Order Handling Rules, which were implemented during 1997,
and the reduction in the increments by which securities are quoted.

Interest, net increased 59.0% to $2.0 million in 1997, from $1.3 million in
1996. This increase was primarily due to larger cash balances held at banks
and the Company's clearing brokers, which was offset in part by increased
transaction-related interest expense resulting from a higher level of
securities sold, not yet purchased.

Expenses

Payments for order flow decreased 4.2% to $66.9 million, from $69.8 million
in 1996. As a percentage of net trading revenue, payments for order flow
decreased to 29.8% in 1997, as compared to 38.0% in 1996. The decrease in
payments for order flow on a dollar basis and as a percentage of total revenue
resulted from changes in the Company's order flow payment policy, changes in
the mix of market orders versus limit orders, and changes in customer mix.
Payments for order flow made to broker-dealer owners and subordinated note
holders represented 75.7% of total payments for order flow in 1997, from 66.4%
in 1996.

Execution and clearance fees increased 24.1% to $32.1 million in 1997, from
$25.8 million in 1996. As a percentage of net trading revenue, execution and
clearance fees remained relatively constant and were 14.3% of net trading
revenue in 1997 and 14.0% of net trading revenue in 1996. The increase on a
dollar basis was primarily due to increased trade volume, which was offset, in
part, by a decrease in clearance rates charged by clearing brokers, and growth
in the volume of OTC securities transactions, which have lower execution costs
than transactions in listed securities. The increase in execution and
clearance fees as a percentage of net trading revenue was primarily due to the
decrease in the average net trading revenue per trade.

Employee compensation and benefits expense increased 46.1% to $57.7 million
in 1997, from $39.5 million in 1996. As a percentage of net trading revenue,
employee compensation and benefits expense increased to 25.7% in 1997, from
21.5% in 1996. The increase on a dollar basis and as a percentage of net
trading revenue was primarily due to the Company's increased profitability and
growth in the number of employees. Due to increased net trading revenue and
profitability, Profitability Based Compensation increased 44.2% to $45.0
million in 1997, from $31.2 million in 1996. The number of employees increased
to 317 employees as of December 31, 1997, from 195 employees as of December
31, 1996.

29
<PAGE>

Communications and data processing expense increased 56.2% to $6.8 million
in 1997, from $4.4 million in 1996. This increase was generally attributable
to higher trading volumes, and an increase in the number of employees.

Depreciation and amortization expense increased 42.0% to $4.2 million in
1997, from $3.0 million in 1996. This increase was primarily due to the
purchase of approximately $4.8 million of additional fixed assets and
leasehold improvements during 1997 and the amortization of goodwill related to
the acquisition of the listed securities market-making business of Trimark.

Interest on Preferred Units expense decreased 7.2% to $1.9 million in 1997,
from $2.1 million in 1996. This decrease was primarily due to the redemption
and retirement of 1,022,208 Preferred A Units by the Company in April 1997 for
$10.2 million.

Occupancy and equipment rentals expense increased 49.6% to $2.7 million in
1997, from $1.8 million in 1996. This increase was primarily attributable to
additional office space and increased computer equipment lease expense. The
Company occupied 56,351 square feet of office space at December 31, 1997, up
from 47,598 square feet of office space at December 31, 1996.

Business development expense increased 134.1% to $1.5 million in 1997, from
$623,000 in 1996. This increase was primarily the result of higher travel and
entertainment costs.

Other expenses increased 96.0% to $2.8 million in 1997, from $1.4 million in
1996. This increase was primarily due to increased professional fees for
computer programming and systems consultants.

Income Tax

Pro forma income tax expense was determined using an effective tax rate of
43% for 1997 and 1996.

YEAR ENDED DECEMBER 31, 1996 VERSUS THE PERIOD FROM MARCH 27, 1995 THROUGH
DECEMBER 31, 1995

Revenues

Net trading revenue increased to $183.9 million in 1996, from $69.5 million
for the period from March 27, 1995 through December 31, 1995 (the "1995
Period"). Total trade volume increased to 11.6 million trades in 1996, from
5.0 million trades in the 1995 Period. Total share volume increased to 10.8
billion shares traded in 1996, from 4.7 billion shares traded in the 1995
Period. Average net trading revenue per trade increased to $15.86 per trade in
1996, from $13.92 per trade in the 1995 Period due to significant growth in
OTC securities volume.

Interest, net increased to $1.3 million in 1996, from $296,000 in the 1995
Period. This increase was primarily due to larger cash balances held at banks
and the Company's clearing brokers and the exchange of $5.0 million of
subordinated notes for equity interests in the Company in January 1996, which
was offset, in part, by increased transaction-related interest expense costs
resulting from a higher level of securities sold, not yet purchased.

Expenses

Payments for order flow increased to $69.8 million in 1996, from $26.0
million in the 1995 Period. As a percentage of net trading revenue, payments
for order flow increased slightly to 38.0% in 1996, from 37.4% in the 1995
Period. The increase on a dollar basis and as a percentage of net trading
revenue resulted from the commencement of OTC securities market-making in July
1995, and the higher trading volumes in 1996. Payments for order flow made to
broker-dealer owners and subordinated note holders represented 66.4% of total
payments for order flow for 1996, from 55.4% in the 1995 Period.

Execution and clearance fees increased to $25.8 million in 1996, from $12.7
million in the 1995 Period. As a percentage of net trading revenue, execution
and clearance fees decreased to 14.0% in 1996, from 18.3% in the 1995 Period.
The dollar increase was primarily due to increased trade volumes. The decrease
as a

30
<PAGE>

percentage of net trading revenue was primarily due to strong growth in the
volume of OTC securities transactions, which have lower execution costs than
transactions in listed securities.

Employee compensation and benefits expense increased to $39.5 million in
1996, from $12.2 million in the 1995 Period. As a percentage of net trading
revenue, employee compensation and benefits expense increased to 21.5% in
1996, from 17.5% in the 1995 Period. The increase on a dollar basis and as a
percentage of net trading revenue was primarily due to increased profitability
and growth in the number of employees. The number of employees increased to
195 employees as of December 31, 1996, from 152 employees as of December 31,
1995.

Communications and data processing expense increased to $4.4 million in
1996, from $2.2 million in the 1995 Period. This increase was generally
attributable to higher trading volumes and an increase in the number of
employees.

Depreciation and amortization expense increased to $3.0 million in 1996,
from $1.6 million in the 1995 Period. This increase was the result of the
purchase of $3.9 million of additional fixed assets and leasehold improvements
during 1996 and the amortization of goodwill related to the acquisition of the
listed securities market-making business of Trimark.

Interest on Preferred Units expense increased to $2.1 million in 1996, from
$1.3 million in the 1995 Period. This increase was primarily due to the
issuance of $13.2 million Preferred A Units during 1996, which was offset in
part by the redemption and retirement of $3.9 million Preferred A Units by the
Company in April 1996.

Occupancy and equipment rentals expense increased to $1.8 million in 1996,
from $849,000 in the 1995 Period. This increase was primarily attributable to
additional office space leased by the Company in 1996. The Company occupied
47,598 square feet of office space at December 31, 1996, up from 26,174 square
feet of office space at December 31, 1995.

Business development expense increased to $623,000 in 1996, from $130,000 in
the 1995 Period. This increase was primarily the result of higher travel and
entertainment costs.

Other expenses decreased to $1.4 million in 1996, from $1.5 million in the
1995 Period. This decrease was primarily due to higher professional fees and
promotional costs incurred in the 1995 Period in connection with the formation
of Knight and the acquisition of the listed securities market-making business
of Trimark.

Income Tax

Pro forma income tax expense was determined using an effective tax rate of
43% for 1996 and 46% in the 1995 Period. The effective tax rate in the 1995
Period differed from the effective rate in 1996 due to one-time nondeductible
syndication expenses incurred in the 1995 Period in connection with the
formation of the Company.

31
<PAGE>

CONSOLIDATED QUARTERLY RESULTS

The following table sets forth certain unaudited consolidated quarterly
statement of income data, such data as a percentage of total revenues and
certain unaudited consolidated quarterly operating data for the nine quarters
ended March 31, 1998. In the opinion of the Company's management, this
unaudited information has been prepared on substantially the same basis as the
consolidated financial statements appearing elsewhere in this Prospectus and
includes all adjustments (consisting of normal recurring adjustments)
necessary to present fairly the unaudited consolidated quarterly data. The
unaudited consolidated quarterly data should be read in conjunction with the
audited consolidated financial statements and notes thereto appearing
elsewhere in this Prospectus. The results for any quarter are not necessarily
indicative of results for any future period.

<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------------------------------------------
Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31,
1996 1996 1996 1996 1997 1997 1997 1997 1998
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Net trading reve-
nue............... $ 39,138 $ 54,000 $ 38,150 $ 52,606 $ 50,482 $ 49,656 $ 58,060 $ 66,426 $ 63,007
Interest, net...... 174 219 389 500 496 435 510 598 526
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenues..... 39,312 54,219 38,539 53,106 50,978 50,091 58,570 67,024 63,533
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Expenses
Payments for order
flow.............. 14,234 19,390 15,696 20,509 18,129 16,841 16,136 15,806 16,257
Execution and
clearance fees.... 5,819 6,592 5,936 7,489 6,411 6,873 8,576 10,209 10,241
Employee
compensation and
benefits.......... 7,745 12,627 7,932 11,191 12,013 12,492 15,034 18,178 16,168
Communications and
data processing... 882 1,063 1,124 1,291 1,319 1,721 1,832 1,937 2,170
Depreciation and
amortization...... 637 719 770 849 936 1,062 1,083 1,143 1,291
Interest on
Preferred Units... 504 451 540 597 604 477 435 425 416
Occupancy and
equipment
rentals........... 436 424 450 468 537 565 666 889 1,082
Business
development....... 101 140 162 221 245 432 321 462 377
Other.............. 241 307 357 523 365 737 860 837 747
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total expenses..... 30,599 41,713 32,967 43,138 40,559 41,200 44,943 49,886 48,749
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income
taxes.............. 8,713 12,506 5,572 9,968 10,419 8,891 13,627 17,138 14,784
Pro forma income tax
expense............ 3,747 5,378 2,396 4,286 4,480 3,823 5,860 7,369 6,357
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Pro forma net
income............. $ 4,966 $ 7,128 $ 3,176 $ 5,682 $ 5,939 $ 5,068 $ 7,767 $ 9,769 $ 8,427
========== ========== ========== ========== ========== ========== ========== ========== ==========
Revenues
Net trading
revenue........... 99.6% 99.6% 99.0% 99.1% 99.0% 99.1% 99.1% 99.1% 99.2%
Interest, net...... 0.4 0.4 1.0 0.9 1.0 0.9 0.9 0.9 0.8
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenues..... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Expenses
Payments for order
flow.............. 36.2 35.8 40.7 38.6 35.6 33.6 27.5 23.6 25.6
Execution and
clearance fees.... 14.8 12.2 15.4 14.1 12.6 13.7 14.6 15.2 16.1
Employee
compensation and
benefits.......... 19.7 23.3 20.6 21.1 23.6 24.9 25.7 27.1 25.4
Communications and
data processing... 2.2 2.0 2.9 2.4 2.6 3.4 3.1 2.9 3.4
Depreciation and
amortization...... 1.6 1.3 2.0 1.6 1.8 2.1 1.8 1.7 2.0
Interest on
Preferred Units... 1.3 0.8 1.4 1.1 1.2 1.0 0.8 0.6 0.7
Occupancy and
equipment
rentals........... 1.1 0.7 1.2 0.9 1.0 1.1 1.2 1.3 1.7
Business
development....... 0.3 0.3 0.4 0.4 0.5 0.9 0.5 0.7 0.6
Other.............. 0.6 0.5 0.9 1.0 0.7 1.6 1.5 1.3 1.2
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total expenses..... 77.8 76.9 85.5 81.2 79.6 82.3 76.7 74.4 76.7
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income
taxes.............. 22.2 23.1 14.5 18.8 20.4 17.7 23.3 25.6 23.3
Pro forma income tax
expense............ 9.5 9.9 6.2 8.1 8.8 7.6 10.0 11.0 10.0
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Pro forma net in-
come............... 12.7% 13.2% 8.3% 10.7% 11.6% 10.1% 13.3% 14.6% 13.3%
========== ========== ========== ========== ========== ========== ========== ========== ==========
OTHER OPERATING DA-
TA(1):
Total shares traded
................... 2,316,854 2,909,494 2,360,870 3,170,712 3,392,640 3,594,245 5,025,399 6,110,546 7,406,164
Total trades
executed .......... 2,518 3,021 2,637 3,422 3,780 4,141 5,550 6,793 7,572
Average daily trades
................... 40 48 42 53 63 65 88 103 124
Average daily net
trading revenues... $ 621 $ 857 $ 606 $ 809 $ 841 $ 776 $ 922 $ 1,006 $ 1,033
</TABLE>
- -------
(1) In thousands.

32
<PAGE>

The Company has experienced and expects to continue to experience,
significant fluctuations in quarterly operating results, including the value
of the Company's securities positions and the Company's ability to manage the
risks attendant thereto, the volume of its market-making activities,
volatility in the securities markets, its ability to manage personnel,
overhead and other expenses, the amount of revenue derived from limit orders
as a percentage of total revenues, changes in payments for order flow,
clearing costs, the addition or loss of sales and trading professionals,
regulatory changes, the amount and timing of capital expenditures, the
incurrence of costs associated with acquisitions and general economic
conditions. The Company's expense structure is based on historical expense
levels and the levels of demand for the Company's market-making services. If
demand for the Company's market-making services declines and the Company is
unable to adjust its cost structure on a timely basis, the Company's operating
results could be materially and adversely affected. The Company has
experienced, and may experience in the future, significant seasonality in its
business. The Company has historically experienced an increase in revenues in
the fourth quarter of the year, which the Company believes is due, in large
part, to higher trading volumes in the securities markets at year end. The
Company believes that this seasonal trend will continue for the foreseeable
future and that the Company's business, financial condition and operating
results may be affected by such trends in the future.

Due to all of the foregoing factors, period-to-period comparisons of the
revenues and operating results of the Company are not necessarily meaningful
and such comparisons cannot be relied upon as indicators of future
performance. There also can be no assurance that the Company will be able to
sustain the rates of revenue growth that it has experienced in the past, that
it will be able to improve its operating results or that it will be able to
sustain its profitability on a quarterly basis. See "Risk Factors--Risks
Associated with Potential Fluctuations in Quarterly Results; Seasonality."

LIQUIDITY

The Company has financed its business primarily through cash generated by
operations, as well as the private placement of preferred and common units and
borrowings under subordinated notes. As of March 31, 1998, the Company had
$171.1 million in assets, 86.0% of which consisted of cash or assets readily
convertible into cash (principally receivables from clearing brokers and
securities owned). Receivables from clearing brokers include interest bearing
cash balances held with clearing brokers and net receivables for transactions
that have not yet reached their contracted settlement date, which is generally
within three business days of the trade date. Securities owned principally
consist of equity securities which trade in NASDAQ and on the NYSE and AMEX
markets.

Pro forma net income plus depreciation and amortization was $9.7 million
during the three months ended March 31, 1998, up 41.3% from $6.9 million
during the comparable period in 1997. Pro forma net income plus depreciation
and amortization was $32.8 million in 1997, up 36.9% from $23.9 million in
1996. Depreciation and amortization expense, which related to fixed assets and
goodwill, was $1.3 million for the three months ended March 31, 1998, from
$936,000 for the comparable period in 1997. Depreciation and amortization
expense was $4.2 million and $3.0 million in 1997 and 1996, respectively. The
Company's capital expenditures were $2.4 million for the three months ended
March 31, 1998 or 4% of total revenues. Capital expenditures were $5.2 million
in 1997 and $5.3 million in 1996, or 2% and 3% of total revenues in each year,
respectively. Capital expenditures in 1997 primarily related to the purchase
of data processing and communications equipment, as well as leasehold
improvements and additional office facilities to support the Company's growth.
Additionally, during 1997, the Company made cash payments of $2.4 million in
connection with its acquisitions of the listed securities market-making
businesses of Trimark in 1995 and Tradetech in 1997. The Company's aggregate
minimum rental commitments for 1998 are $3.8 million, and it expects that it
will incur $8.0 million of capital expenditures during 1998.

As registered broker-dealers and market makers, Knight and Trimark are
subject to regulatory requirements intended to ensure the general financial
soundness and liquidity of broker-dealers and requiring the maintenance of
minimum levels of net capital, as defined in SEC Rule 15c3-1 ($1.0 million
each as of March 31, 1998). These regulations also prohibit a broker-dealer
from repaying subordinated borrowings, paying cash

33
<PAGE>

dividends, making loans to its parent, affiliates or employees, or otherwise
entering into transactions which would result in a reduction of its total net
capital to less than 120.0% of its required minimum capital. Moreover, broker-
dealers, including Knight and Trimark, are required to notify the SEC prior to
repaying subordinated
borrowings, paying dividends and making loans to its parent, affiliates or
employees, or otherwise entering into transactions, which, if executed, would
result in a reduction of 30.0% or more of their excess net capital (net
capital less minimum requirement). The SEC has the ability to prohibit or
restrict such transactions if the result is detrimental to the financial
integrity of the broker-dealer. At March 31, 1998, Knight had net capital of
$39.1 million, which was $38.1 million in excess of its required net capital
of $1.0 million and Trimark had net capital of $16.1 million, which was $15.1
million in excess of its required net capital of $1.0 million.

The Company has used a portion of its capital resources to pay interest on
its issued and outstanding Mandatorily Redeemable Preferred A and B Units, and
to make quarterly distributions to its members to meet their estimated income
tax obligations on their share of the Company's taxable income. The Preferred
A and B Units bore interest at a rate approximating the Federal Funds rate.
The Preferred A Units were redeemed and retired in their entirety in April
1998 for approximately $12.5 million in cash. In April 1998, the Company
redeemed a portion of the Preferred B Units for approximately $1.2 million in
cash. The Company intends to use $13.8 million of the proceeds of the Offering
to redeem all of the remaining outstanding Preferred B Units. See "Use of
Proceeds." After the Offering, the Company will no longer make distributions
to its owners for income tax purposes.

The Company and its subsidiaries currently anticipate that net proceeds from
this Offering together with their available cash resources and credit
facilities will be sufficient to meet their anticipated working capital and
capital expenditure requirements for at least the next 12 months.

MARKET RISK

On January 28, 1997, the SEC adopted new rules (Securities Act Release No.
7386) that require disclosures about the policies used to account for
derivatives, and certain quantitative and qualitative information about market
risk exposures. Since its inception, neither the Company or its subsidiaries
has traded or otherwise transacted in derivatives.

In the normal course of its market-making business, the Company maintains
inventories of exchange-listed and OTC securities. The fair value of these
securities at March 31, 1998 and December 31, 1997 was $63.5 million and $61.7
million, respectively, in long positions and $54.6 million and $21.1 million,
respectively, in short positions. The potential loss in fair value, using a
hypothetical 10.0% decline in prices, is estimated to be approximately $1.0
million and $4.0 million as of March 31, 1998 and December 31, 1997,
respectively, due to the offset of losses in long positions with gains in
short positions.

For working capital purposes, the Company invests in money market funds or
maintains interest bearing balances in its trading accounts with clearing
brokers, which are classified as cash equivalents and receivable from clearing
brokers, respectively, in the consolidated statement of financial condition.
These amounts do not have maturity dates or present a material market risk, as
the balances are short-term in nature and subject to daily repricing.

YEAR 2000

34
<PAGE>

Company's main trading-related systems are currently Year 2000 compliant. The
Company plans to have its other computer systems certified by the end of 1998.
However, there can be no assurance that such schedule will be met or the
systems of other companies on which the Company's business is dependent also
will be converted timely or that any such failure to convert by another
company would not have an adverse effect on the Company's business. Although
the Company believes that its systems will be Year 2000 compliant, there can
be no assurance that they will be, and if not, it may have a material adverse
effect on the Company's business, financial condition and operating results.
The Company's progress under its Year 2000 compliance plan is reviewed and
monitored by senior management.

The success of the Company's plan depends heavily on parallel efforts being
undertaken by other entities with which the Company's systems interact, most
notably the Company's clearing brokers and the major securities industry
service organizations, and therefore, the Company is taking steps to determine
the status of these other entities' Year 2000 compliance. The Company's plan
includes participating in industry-wide testing during the fourth quarter of
1998.

The total cost of the Year 2000 project is currently estimated to be
approximately $500,000. This amount primarily represents the total estimated
man-hour costs of internal Company resources working on the Year 2000 project.
Costs related to the project are expensed as incurred, and the Company has
incurred approximately $250,000 of such costs as of March 31, 1998.

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 125, Accounting for
Transfers of Assets and Servicing of Financial Assets and Extinguishments of
Liabilities, which provides accounting and reporting standards for transfers
and servicing of financial assets and extinguishments of liabilities. On
December 31, 1996, the FASB issued SFAS No. 127, Deferral of the Effective
Date of Certain Provisions of FASB Statement No. 125, which defers the
effective date of SFAS No. 125 until January 1, 1998 for transfers which are
part of repurchase agreements, dollar-roll, securities lending or similar
transactions. The Company adopted SFAS No. 125 and SFAS No. 127 effective
January 1, 1997 and January 1, 1998, respectively. The adoption of the
provisions of these standards did not have a material impact on the Company's
financial statements.

In February 1997, the FASB issued SFAS No. 128, Earnings Per Share. This
statement establishes standards for computing and presenting earnings per
share and applies to entities with publicly held common stock or potential
common stock. The Company adopted the provisions of SFAS No. 128 effective
December 31, 1997. The adoption of these provisions required the presentation
of earnings per share in the financial statements included elsewhere in this
Prospectus.

In February 1997, the FASB also issued SFAS No. 129, Disclosure of
Information about Capital Structure. This statement establishes standards for
disclosing information about an entity's capital structure. The Company
adopted the provisions of SFAS No. 129 on its effective date of January 1,
1998. The adoption of these provisions did not have a material impact on the
Company's financial statements.

In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income
which establishes standards for the reporting and display of comprehensive
income and its components. The Company adopted the provisions of SFAS No. 130
on its effective date of January 1, 1998. The adoption of these provisions did
not have any impact on the Company's financial statements.

In June 1997, the FASB also issued SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information, which determines how segments are
determined and reported. The Company adopted the provisions of SFAS No. 131 on
its effective date of January 1, 1998. As the Company operates only in a
single segment and a single line of business - equity securities market-
making, the adoption of these provisions did not have any impact on the
Company's financial statements.

35
<PAGE>

BUSINESS

OVERVIEW

Since the beginning of 1997, Knight and Trimark have significantly increased
their market share of trading volume in each of their respective markets.
According to AutEx, Knight's advertised share volume in NASDAQ increased from
614.7 million shares representing 4.4% of total market share (or a rank of 6th
overall) for the month of January 1997, to 1.2 billion shares representing
8.1% of total market share (or a rank of 2nd overall) for the month of
December 1997, to 1.9 billion shares representing 9.9% of total market share
(or a rank of 1st overall) for the month of March 1998. According to the NASD,
Trimark's reported share volume of the NYSE-listed securities increased from
234.2 million shares representing 21.2% of total NYSE Third Market volume (or
a rank of 1st overall) for the month of January 1997, to 338.4 million shares
representing 30.5% of total NYSE Third Market volume (or a rank of 1st
overall) for the month of December 1997, to 445.6 million shares representing
33.1% of total NYSE Third Market volume (or a rank of 1st overall) for the
month of March 1998. Trimark's reported share volume of AMEX-listed securities
increased from 40.2 million shares representing 51.4% of total AMEX Third
Market volume (or a rank of 1st overall) for the month of January 1997, to
78.7 million shares representing 66.4% of total AMEX Third Market volume (or a
rank of 1st overall) for the month of December 1997, to 80.4 million shares
representing 68.9% of total AMEX Third Market volume (or a rank of 1st
overall) for the month of March 1998.

INDUSTRY BACKGROUND

During recent years, the U.S. market for equity securities has experienced
dramatic growth in trading volumes. The average daily volume of securities
traded in NASDAQ increased from 225.0 million shares in December 1992 to 678.5
million shares in December 1997. The average daily volume of securities traded
on the NYSE increased from 222.2 million shares in December 1992 to 546.9
million shares in December 1997. During this period, the average daily trading
volume of the Third Market, which consists of trading in NYSE- and AMEX-listed
securities in the OTC market, also increased significantly. The increase in
trading volume has resulted from a number of factors, including the growth of
cash flows into equity-based mutual funds, historic high returns in U.S.
equity markets, the emergence and market acceptance of electronic discount
brokers, technological innovations, such as the emergence of the Internet, and
reduced transaction costs. In addition, due to favorable market conditions,
companies have increasingly raised capital through the U.S. equity markets,
which has resulted in a significant increase in the number of companies that
are quoted in NASDAQ or listed on the NYSE. At March 31, 1998, there were
approximately 5,500 and 3,046 companies, respectively, quoted in NASDAQ and
listed on the NYSE, as compared to approximately 4,100 and 2,008 at December
31, 1992.

The retail brokerage business has been impacted by advances in technology
that have provided new and inexpensive means for individual investors to
access and participate in the market for equity securities. For example, the
Internet has facilitated individual investors' access to market information
and has significantly reduced transaction costs. The proliferation of Internet
brokers has resulted in dramatically lowered commissions charged for trading
securities. For example, some Internet brokers charge less than $10.00 per
trade for a 1,000 share trade compared to over $300.00 per trade for some
traditional "full service" brokers. While handling an increasing number of
trades for a wide range of securities, Internet brokers provide more

36
<PAGE>

immediate access to the market place than many other retail brokers.
Additionally, mutual funds and other institutional investors are also
demanding better execution of their trades and are seeking to reduce trading
costs. The Internet brokerage business model and the demands of institutional
investors have forced traditional brokers to change their approach to their
business and seek ways to manage increased trading volumes while providing
improved trade execution and reducing costs.

These changes have caused significant pressure on market makers, a critical
and lesser known part of the securities industry. Market makers typically
provide trading execution by offering to buy securities from, or sell
securities to, broker-dealers and institutional investors. Firms that have
elected to make a market in a security display the price at which they are
willing to buy (bid) or sell (ask) these securities and adjust their bid and
ask prices in response to the forces of supply and demand for each security.
Market makers are either a department within larger, diversified securities
firms or independent businesses. The internal market-making departments of
securities firms often are limited in their ability to handle significant
trading volumes in a broad range of securities and, as a result, are often
unable to provide adequate or enhanced liquidity. Most discount brokers and
on-line brokers do not have internal market-making functions and, accordingly,
rely entirely on independent market makers for trade execution.

A market maker typically acts as principal and derives most of its revenues
from the difference between the price paid when a security is bought and the
price received when that security is sold. In the past, market makers relied
on the spreads between bid and ask prices to ensure profitability and built
cost structures based on these spreads. However, changes in regulations
governing the securities industry and, to a lesser extent, the move from
securities being quoted in sixteenths rather than eighths of a dollar, have
dramatically reduced average spreads. Implemented in January 1997, the SEC's
Limit Order Display Rule requires the display or execution of customer limit
orders (orders to buy or sell stock at a particular price) that (1) are priced
better than a market maker's quote or (2) in certain circumstances add to the
size associated with the market maker's quote when the market maker is at the
best price in the market. The Limit Order Display Rule enables investors to
advertise directly their trading interest to the market, thereby allowing them
to compete with market maker quotes and affect the size of bid-ask spreads.
Additional regulations adopted by the NASD require market makers to fill a
customer's limit order before their own trades. Since the implementation of
the Limit Order Display Rule and the move to trading in sixteenths of a
dollar, NASDAQ and NYSE spreads have each decreased by an average of 35%.
Spreads could further decline if NASDAQ adopts proposed regulations under
which securities would be traded in decimals rather than in fractions.

In this new narrower spread environment, maintaining profitability has
become extremely difficult for many traditional marker makers. At the same
time, market makers have become subject to an increasing demand for better
execution standards and improved customer service. To meet these demands and
remain competitive, market makers have been forced to reexamine their
traditional spread-based approach to market making and to make extensive
technological and human resource investments. To leverage these large
investments and to remain profitable, market makers must execute a larger
volume of trades and maintain increased inventory positions. However, the
significant increases in trading volumes are only a benefit for the market
maker if its cost per trade is lower than its revenues per trade and if the
market maker is able to manage the risks associated with larger inventory
positions.

In response to these challenges, traditional brokerage firms are
increasingly electing to focus on their core competencies and to outsource
their market-making functions to independent market makers. In addition,
Internet brokers, who are handling increased trading volume, also utilize
independent market makers. According to AutEx, in March 1998, the three
largest independent market makers represented a combined market share of 25.4%
of the trading volumes of OTC equity securities, up from 17.2% in March 1997.
Similarly, according to the NASD, in March 1998 the three largest Third Market
trading firms represented a combined market share of 58% of the Third Market
volume in NYSE-listed equity securities compared to 42% in June 1997. The
three largest Third Market trading firms in AMEX-listed securities represented
a combined market share of 75% in March 1998 compared to 55% in June 1997.
While large volumes of trading provides an opportunity to spread fixed costs
over a larger number of trades, net profit per

37
<PAGE>

trade has declined. Certain independent market makers are seeking new trading
methodologies to identify and take advantage of the profit opportunities
represented by each trade. These market makers are also seeking to increase
the number of buy and sell orders that they receive ("order flow") which, in
turn, will provide increased trading profit opportunities. These market makers
require efficient and sophisticated systems and risk management practices and
personnel with the requisite expertise to deliver superior trade execution and
customer service, while handling increased order flow and maintaining low
costs per trade.

THE KNIGHT/TRIMARK SOLUTION

The Company is a leading market maker in NASDAQ securities, other OTC equity
securities and equity securities listed on the NYSE and the AMEX in the Third
Market. The Company has attained a leadership position by providing best
execution services to broker-dealer and institutional customers through its
sophisticated trading systems and proprietary methods. Pursuant to the NASD
Conduct Rules, best execution requires broker-dealers to buy and sell
securities in a manner that provides the customers with a price as favorable
as possible under prevailing conditions. Through Knight, the Company makes
markets in approximately 4,200 equity securities in NASDAQ and on the NASD's
OTC Bulletin Board. The Company, through Trimark, makes markets in all NYSE-
and AMEX-listed equity securities in the Third Market. Throughout its
existence, the Company has focused entirely on trading equity securities and,
due to its significant investment in technological and professional resources,
it intends to continue to focus on trading equity securities in the future.
The Company is committed to providing a value-added execution methodology that
emphasizes automated execution and rule compliance, real-time information
access to customers and pricing plus liquidity advantages based upon the
Company's willingness to commit capital. While most of the Company's trades
are automatically executed electronically, automatic execution is highly
dependent on the determination and manual entry of bid-ask prices by traders.
Furthermore, the Company's trading revenues depend significantly on the
management of inventory by its skilled and experienced trading professionals.
The main elements of the Company's solution include:

. Superior Execution and Enhanced Liquidity. The Company has implemented a
variety of best execution practices which meet or exceed customer
requirements and provide its customers with significantly enhanced
liquidity, while complying with SEC and NASD regulations. These practices
include the following:

Knight

- Knight provides guaranteed, automated, electronic, continuous execution
for over 3,000 NASDAQ securities in which it makes markets for orders of
up to 2,000-3,000 shares on quotes as low as 100 shares.

- Knight, a year prior to the implementation of the SEC's Limit Order
Display Rule, established a policy of displaying all unexecuted limit
orders for 2,000 shares or greater.

- In March 1998, for securities in which Knight was a market maker, 99.9%
of all orders eligible for automated execution were executed within 3
seconds.

- Knight was the first, and remains the only, market maker to guarantee
execution, at the opening, of market-eligible orders it has received
before the opening for all shares in which it makes a market, up to an
aggregate of 250,000 shares.

- Knight guarantees that it will execute trades at the opening price for
substantially all NASDAQ initial public offerings, up to an aggregate of
250,000 shares.

- Knight has considerable expertise in handling large trades and, in March
1998, it executed 80,559 trades of 5,000 shares or greater.

- Knight was the first market maker to accept stop orders on all NASDAQ
stocks. A stop order is an order to buy/sell a security immediately if
the security's market price falls/rises to a specified price.

Trimark

- Trimark provides guaranteed, automated, electronic, continuous execution
in every NYSE- and AMEX-listed equity security at the National Best Bid
or Offer ("NBBO") for all orders eligible for automated execution.

38
<PAGE>

- Trimark accepts all orders that can be sent to a primary exchange, i.e.
short sale, all or none, or stop order.

- Trimark provides execution for orders up to 5,000 shares at the NBBO
regardless of the quote's size for a select group of over 500 of the most
actively traded stocks, representing more than 75% of NYSE volume.

- Trimark not only guarantees the customer's market order to receive the
best price available on any exchange or by any competing market maker,
but Trimark frequently delivers that price for many more shares than
advertised if demanded by the customer.

- Trimark offers various proprietary features such as limit order execution
protection based on the primary exchange and price improvement
guarantees.

. Commitment to Highest Quality Customer Service. The Company is committed to
providing the highest quality customer service. The Company believes that
its highly skilled, experienced and entrepreneurial workforce is uniquely
positioned to address the needs of its customers. The Company has 49
employees involved in customer service, with an average of 7.5 years of
related experience. The Company's customer service group is dedicated to
handling orders greater than the automated execution size and ensuring
consistent quality of execution.

The Company is currently implementing its proprietary electronic
communications gateway product, "e.Knight," which enables broker-dealers and
institutions to access the Knight and Trimark trading systems from their
desktops through the Internet and other electronic communications gateways.
In addition, e.Knight provides a backup service to certain of the Company's
customers. If a customer's system fails, e.Knight is designed to provide the
customer with uninterrupted access to the Company's trading systems and
thereby enables the customer to continue to provide services to its clients.

The Company supplies each of its customers with monthly execution reports
that provide a level of detail exceeding regulatory requirements. The report
documents the percentage of price-improved shares and trades, the average
dollar value per share and the total dollar value of all price improvements.
This report is a valuable tool to the Company's customers as it enables them
to monitor their compliance with regulatory requirements to seek and obtain
best execution for their clients' trades.

. Sophisticated Trading Technology. The Company relies on sophisticated
technology to facilitate its market-making activities. Knight uses the
Brass trading system under license from Automated Securities Clearance,
Ltd. ("ASC"). Brass is used by over 130 market makers. Knight is one of
only two Brass users to run Brass on its own computers with its own
personnel, while other market makers use ASC as a service bureau. Trimark
employs a TCAM/Appletree trading system. The Company has made significant
investments in its technology platform and infrastructure since its
inception. The Company's trading systems are augmented by software
applications that enable the processing of a large volume of order flow
efficiently, without diminishing speed of execution. The Company's systems
are designed to process up to 500,000 trades per day and in March, 1998
handled a combined average of 134,000 trades per day.

. Proprietary Trading Methods. The Company's net trading revenues are
dependent on its ability to evaluate and act rapidly on market trends and
successfully manage risk. The Company's methodology focuses on the dynamic,
real time analysis of market activity and price movements, which enables
the Company to better manage risk. Throughout the business day, the Company
continually analyzes its trading positions in individual securities and
monitors its short and long positions and its aggregate profits and losses.
Management uses this information to assess market trends and adjust its
trading strategy on a real-time basis in an effort to maximize its trading
profits.

<PAGE>

STRATEGY

The Company's goal is to maintain and enhance its leadership position in the
market-making industry through the following key strategies:

Continue to Invest in Leading Technologies. The Company believes that its
future growth and profitability will depend largely on its continued
investment in leading technologies. For example, the Company believes that an
increasing number of customers and proportion of order flow will reach market
makers through the Internet and other electronic communications gateways. The
Company intends to expand into this growing market segment by increasing the
number of customers with access to e.Knight and by examining other possible
electronic means of capturing order flow. The Company also intends to augment
its Brass and TCAM/Appletree trading systems with proprietary software
applications to ensure that it has the capability to process greater trading
volumes in the future.

Aggressively Capture New Order Flow. The Company believes that extensive
order flow is critical to creating opportunities for trading revenues. The
Company is focused on increasing order flow to enhance its position as a
leading market maker and create additional revenue opportunities. The Company
intends to retain and expand customer relationships by continuing to provide
low-cost, high quality execution services, and intends to continue to respond
to evolving customer needs through the development of new services and
customer service excellence. Knight is seeking regulatory approval to increase
the number of securities in which it is allowed to make a market.

Significantly Expand Institutional Market Share. The Company believes it has
an opportunity to significantly increase its institutional customer base.
Trades for institutional investors generally have higher margins because these
investors do not receive payments for order flow. The Company is seeking to
increase its penetration of this market by marketing e.Knight to institutions
that manage more than $1 billion in assets and invest predominantly in equity
securities. In addition, within the next 18 months, the Company also plans to
significantly increase its institutional sales force.

Invest in and Develop the Best Human Capital. The Company believes that
investing in human capital is key to delivering best execution practices and
high quality customer service. The Company intends to continue its practice of
aggressively recruiting high caliber personnel and retaining such personnel by
providing appropriate compensation incentives. The Company believes that it
has high employee morale due to its competitive performance-based incentive
compensation structure and its encouragement of a highly cooperative and
creative culture. In addition, Knight has its own in-house training program
for trading staff, Knight School, which provides ongoing training and skill-
development to Knight's sales and trading personnel. The Company intends to
expand this initiative and to develop additional programs to improve the
skills and productivity of its workforce.

Develop New Services. The Company intends to continue to develop new
services that address evolving customer needs and technological requirements.
The Company recently launched e.Knight, which it plans to provide to the
majority of its institutional and broker-dealer customers and use as a means
of establishing new customer relationships. The Company also plans to
introduce additional services to support customers in executing equity
transactions. For example, the Company has recently developed an Electronic
Communications Network ("ECN") for order execution in a joint venture with a
wholly-owned subsidiary of ASC. The Company believes that this ECN product
will greatly enhance the breadth of the Company's execution services.

Leverage Cross-Selling Opportunities. The Company jointly markets Knight and
Trimark to offer market-making services for a broad range of securities to its
customers. The Company believes that by creating customer awareness of the
link between the two companies, customer satisfaction in one market can lead
to increased use of the Company's services in other markets. In addition,
customers with the e.Knight gateway will have real-time access to both
Knight's and Trimark's services at their desktops and will be targeted for
cross-selling opportunities.

40
<PAGE>

MARKET SHARE INFORMATION

Since the beginning of 1997, Knight and Trimark have significantly increased
their market share of trading volume in each of their respective markets.
Knight's market share is based on rankings published by AutEx, an electronic
database and on-line, real-time network for trade order indications used by
the securities industry.

<TABLE>
<CAPTION>
PERCENTAGE TOTAL NUMBER
ADVERTISED OF TOTAL OF OTC
MONTH ENDED SHARE VOLUME MARKET SHARE RANK STOCKS TRADED RANK
----------- -------------- ------------ ---- ------------- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
March 1998............... 1,864,544 9.93% 1 6,578 1
February 1998............ 1,451,983 8.95% 1 5,954 2
January 1998............. 1,125,939 7.50% 2 5,873 2
December 1997............ 1,248,282 8.11% 2 6,174 2
November 1997............ 993,276 8.20% 2 5,710 2
October 1997............. 1,396,968 7.14% 2 5,997 2
September 1997........... 1,073,493 6.99% 2 5,651 1
August 1997.............. 890,829 6.39% 3 5,386 1
July 1997................ 859,161 5.84% 3 5,395 1
June 1997................ 671,845 5.22% 5 5,131 1
May 1997................. 651,441 4.93% 6 5,013 1
April 1997............... 636,927 4.99% 6 4,884 1
March 1997............... 562,336 4.67% 6 4,938 1
February 1997............ 572,895 4.72% 6 4,963 1
January 1997............. 614,692 4.38% 6 4,952 1
</TABLE>

Trimark's market share is based on trade volumes reported to the NASD.

<TABLE>
<CAPTION>
THIRD MARKET VOLUME IN
-------------------------------------------------------------------
NYSE SECURITIES AMEX SECURITIES
--------------------------------- ---------------------------------
% THIRD % THIRD
MONTH ENDED SHARE VOLUME MARKET VOLUME RANK SHARE VOLUME MARKET VOLUME RANK
----------- -------------- ------------- ---- -------------- ------------- ----
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
March 1998.............. 445,662 33.1% 1 80,443 68.9% 1
February 1998........... 383,719 34.4% 1 70,301 69.1% 1
January 1998............ 337,126 29.2% 1 58,427 69.0% 1
December 1997........... 338,433 30.5% 1 78,793 66.4% 1
November 1997........... 247,468 28.5% 1 59,410 64.9% 1
October 1997............ 347,815 29.2% 1 84,323 65.8% 1
September 1997.......... 262,594 25.7% 1 58,731 57.9% 1
August 1997............. 238,652 24.1% 1 40,517 52.1% 1
July 1997............... 251,631 22.5% 1 42,540 46.7% 1
June 1997............... 216,472 20.7% 1 33,554 44.0% 1
May 1997................ 202,036 20.7% 1 27,629 42.0% 1
April 1997.............. 180,502 20.6% 1 23,666 41.5% 1
March 1997.............. 181,938 20.2% 1 25,088 43.1% 1
February 1997........... 209,402 22.4% 1 25,807 46.5% 1
January 1997............ 234,291 21.2% 1 40,271 51.4% 1
</TABLE>

ELECTRONIC COMMUNICATIONS NETWORK

ECNs are private trading systems which are popular among institutional
investors and traders because they provide investors with the ability to trade
securities anonymously. ECNs currently account for approximately 20% of the
NASDAQ trading volume.

The Company has entered into a joint venture with ASC, the developer and
owner of the Brass order entry and trading system, to establish an ECN. The
Company owns 20% of the joint venture entity, Brass Utility, L.L.C. ("BRUT").
The Company believes that access to the BRUT ECN will greatly enhance the
breadth of the Company's execution services.

41
<PAGE>

CUSTOMERS

The Company's target customers are national and regional full-service
broker-dealers, electronic discount brokers and institutional investors.
Selected customers of the Company own equity interests in the Company. See
"Certain Transactions--Transactions with Affiliates." The following table
presents a representative list of the Company's customers.

Josephthal & Co. Inc.
Ameritrade Inc. Merrill Lynch, Pierce, Fenner & Smith
BHC Securities, Inc. Incorporated
BHF Securities Corp. Mesirow Financial
Bidwell & Company Nathan & Lewis Securities, Inc.
Brown & Company Securities National Discount Brokers
Corporation National Financial Services Corporation
Burke, Christensen & Lewis PaineWebber Incorporated
Securities, Inc. Primevest Financial Services, Inc.
CIBC Woody Gundy Securities Corp. The R.J. Forbes Group, Inc.
Cowles, Sabol & Co., Inc. Sanders Morris Mundy, Inc.
Dain Rauscher Incorporated Scottsdale Securities, Inc.
David A. Noyes & Co. Southwest Securities, Inc.
Direct Access Brokerage Services, Stockcross, Inc.
Inc. Thomas F. White & Co.
Discover Brokerage Direct U.S. Clearing Corp.
E*TRADE Securities, Inc. Van Kasper & Company
A.G. Edwards & Sons, Inc. Waterhouse Securities, Inc.
Fiserv Correspondent Services, Inc. Wedbush Morgan Securities, Inc.
Gruntal & Co., LLC (Gruntal & Co.,
Inc.)
Howe Barnes Investments, Inc.
International Correspondent Trading,
Inc.
J.W. Charles Securities, Inc.

MARKETING

The Company seeks to increase its market share through direct-response
advertising, advertising on its Web site and a public relations program. The
Company's marketing focuses on advertising its execution services in
publications targeted at the securities industry. In addition, the Company has
a quarterly program of targeted mailings to existing and potential broker-
dealer and institutional customers.

The Company also markets aggressively through one-on-one meetings with
customers and potential customers, and continuous communications with existing
customers. The Company maintains a comprehensive customer database that is
used regularly to better understand and address customer needs. The Company's
marketing strategy is to continue to differentiate itself from competitors by
enhancing its reputation and brand as the provider of highest quality
execution solutions with superior customer service.

CLEARING ARRANGEMENTS

By contract, Knight clears all its trades through Correspondent Services
Corp., a subsidiary of PaineWebber Incorporated ("PaineWebber"). The contract
will remain in effect until terminated by either party upon sixty days' prior
written notice or upon thirty days' written notice in certain limited
circumstances. Trimark is a party to a contract with National Investor
Services Corp., a subsidiary of Waterhouse Investor Services, Inc., pursuant
to which all of Trimark's trades are cleared. The contract will remain in
effect until terminated by either party upon sixty days' prior written notice.
See "Certain Transactions."

42
<PAGE>

TECHNOLOGY

The Company's success is largely attributable to management's ability to
identify and deploy emerging technologies that facilitate the execution of
trades. Technology has not only enhanced the Company's ability to handle order
flow, it has also been an important component of the Company's strategy to
comply with government regulations, achieve the highest execution standards
and provide superior customer service. The Company also uses its technology
and technology licensed from third parties to monitor proactively the
performance of its traders and to assess its inventory positions and to
provide ongoing information to its customers. The Company is electronically
linked to its broker-dealer and institutional customers through dedicated
servers. The Company's trading volume is transacted over dedicated
communications networks, which provide immediate access to the Company's
trading operations and facilitate the handling of customer orders. The Company
plans to continue to make additional investments in technology and to automate
further its execution services.

Architectural Design and Industry Standards. The Company's systems are
designed to be open, interoperable, scalable, redundant and flexible. The
Company utilizes leading edge technologies including Sun Microsystems, Inc.'s
client/server architecture, C/C++ programming languages, Java, relational
database management systems and online analytical processing.

Electronic Commerce. The Company's electronic commerce architecture enables
its broker-dealer and institutional customers to send their orders through a
variety of electronic communications gateways, including the Internet and
direct customer interfaces over the Company's private network. The Company's
customers can use their own order management system, an institutional
portfolio management system or can select from a variety of the Company's
electronic connections.

Knight uses the Brass trading system designed by ASC. This system has a
client/server architecture that uses Sun Microsystems, Inc. workstations and
servers. Knight runs a local version of Brass. Knight also makes extensive use
of application program interfaces ("APIs") to develop software applications.
Trimark uses the Appletree trading system designed by TCAM. This system runs
on Stratus Computer Inc.'s fault tolerant platform. Trimark has also developed
software applications using APIs.

Disaster Recovery Center. The Company is in the process of establishing a
back-up data center and trading facility in Ridgefield, New Jersey. This
facility will be used primarily to accommodate traders if a disaster or major
system malfunction occurs. This back-up data center will run a real-time copy
of the Company's trading systems and house a small group of full-time traders.
To provide for system continuity in the event of short power outages, the
Company has also equipped its three data centers and trading rooms with
uninterruptible power supply units and back up generators.

COMPETITION

43
<PAGE>

delivered, including more direct access on-line to a wide variety of services
and information, and have also created demand for more sophisticated levels of
customer service. The provision of such services may entail considerable cost
without an offsetting increase in revenues. Moreover, current and potential
competitors have established or may establish cooperative relationships among
themselves or with third parties or may consolidate to enhance their services
and products. New competitors or alliances among competitors may emerge and
they may acquire significant market share.

EMPLOYEES

At March 31, 1998 the Company had a total of 337 full-time employees, of
which 246 were employed at Knight and of which 91 were employed at Trimark. Of
Knight's 246 employees, 142 were engaged in market-making activities, 33 in
customer service and 71 in administration. Of Trimark's 91 employees, 55 were
engaged in market-making activities, 16 in customer service and 20 in
administration. None of the Company's employees are subject to a collective
bargaining agreement. The Company believes that its relations with its
employees are excellent.

The Company recruits and retains its employees by compensating them largely
on a performance basis, measuring performance primarily in terms of revenue
generation. The Company is committed to improving the skill levels of its
employees and, to that end, Knight has established Knight School, a weekly
training session in which trading staff learn new trading techniques and are
informed of regulatory developments. The Company intends to expand this
initiative and to develop additional programs to improve the skills and
productivity of its workforce. The Company believes that it has high employee
morale due to its performance-based incentive compensation and its
encouragement of a highly cooperative and creative culture.

INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS

The Company relies primarily on copyright, trade secret and trademark law to
protect its proprietary technology. Notwithstanding the precautions taken by
the Company to protect its intellectual property rights, it is possible that
third parties may copy or otherwise obtain and use the Company's proprietary
technology without authorization or otherwise infringe on the Company's
proprietary rights. It is also possible that third parties may independently
develop technologies similar to those of the Company. It may be difficult for
the Company to police unauthorized use of its intellectual property rights.
There can be no assurance that the steps taken by the Company will prevent
misappropriation of its technology. In addition, litigation may be necessary
in the future to enforce the Company's intellectual property rights, to
protect the Company's trade secrets, to determine the validity and scope of
the proprietary rights of others, or to defend against claims of infringement
or invalidity. Such litigation, whether successful or unsuccessful, could
result in substantial costs and diversions of resources either of which could
have a material adverse effect on the Company's business, financial condition
and operating results. The Company may in the future receive notices of claims
of infringement of other parties' proprietary rights. There can be no
assurance that claims for infringement or invalidity (or claims for
indemnification resulting from infringement claims) will not be asserted or
prosecuted against the Company. Any such claims, with or without merit, could
be time consuming to defend, result in costly litigation, divert management's
attention and resources or require the Company to enter into royalty or
licensing agreements. There can be no assurance that such royalties or
licenses would be available on reasonable terms, if at all, and the assertion
or prosecution of any such claims could have a material adverse effect on the
Company's business, financial condition and operating results.

GOVERNMENT REGULATION

The securities industry in the United States is subject to extensive
regulation under both federal and state laws. In addition, the SEC, the NASD,
other SROs, such as the various stock exchanges, and other regulatory

44
<PAGE>

bodies, such as state securities commissions, require strict compliance with
their rules and regulations. As a matter of public policy, regulatory bodies
are charged with safeguarding the integrity of the securities and other
financial markets and with protecting the interests of customers participating
in those markets, not protecting creditors or stockholders of market makers.
Market makers are subject to regulation concerning certain aspects of their
business, including trade practices, capital structure, record retention and
the conduct of directors, officers and employees. Failure to comply with any
of these laws, rules or regulations could result in censure, fine, the
issuance of cease-and-desist orders or the suspension or disqualification of
its directors, officers or employees, and other adverse consequences, which
could have a material adverse effect on the Company's business, financial
condition and operating results. The Company and certain of its officers and
other employees have, in the past, been subject to claims arising from the
violation of such laws, rules and regulations, which resulted in the payment
of fines and settlements. There can be no assurance that the Company and/or
its officers and other employees will not, in the future, be subject to claims
arising from the violation of such laws, rules and regulations. An adverse
ruling against the Company and/or its employees, including censure or
suspension, could result in the Company and/or its officers and other
employees being required to pay a substantial fine or settlement, and could
result in their suspension or expulsion, which could have a material adverse
effect on the Company's business, financial condition and operating results.

In connection with a three-year industry-wide investigation conducted by the
staff of the SEC into the trading and supervisory activities of many OTC
market makers and certain of their individual supervisory and trading
personnel, in July, 1997, the Staff informed Kenneth Pasternak, President and
Chief Executive Officer of the Company, that he is a subject in their
investigation for certain of his activities as a trading room supervisor at
Troster Singer. All of the activities being investigated took place prior to
Mr. Pasternak joining the Company in 1995 and none of them relate to his
employment by the Company. Mr. Pasternak has also been orally informed by the
Staff that, as a result of its investigation, it currently intends to
recommend to the SEC that Mr. Pasternak be charged with failure to supervise
with respect to several transactions of other traders under his supervision at
Troster Singer and that Mr. Pasternak be suspended for six months, ordered to
cease and desist, and assessed a civil penalty of $50,000. In September, 1997,
Mr. Pasternak submitted a brief to the Staff arguing that these
recommendations would be inappropriate and unsupported by the facts. To date,
the Staff has not forwarded its recommendations to the SEC. The Company cannot
predict the outcome of the Staff's investigation, including whether the Staff
will determine to forward its recommendations to the SEC in their current or a
modified form or at all. If any such charges are brought, Mr. Pasternak
intends to vigorously defend himself against them. If Mr. Pasternak should be
suspended, the Company would seek to replace his services with other Company
personnel. However, the loss of Mr. Pasternak's services would have a material
adverse effect on the Company's business, financial condition and operating
results.

Additional regulation, changes in existing laws and rules, or changes in
interpretations or enforcement of existing laws and rules often directly
affect the method of operation and profitability of securities firms. The
Company cannot predict what effect any such changes might have. Furthermore,
the Company's business, financial condition and operating results may be
materially affected not only by regulations directly applicable to it, but
also by regulations of general application. For example, the volume of the
Company's market-making activities in a given period could be affected by,
among other things, existing and proposed tax legislation, antitrust policy
and other governmental regulations and policies (including the interest rate
policies of the Federal Reserve Board) and changes in interpretation or
enforcement of existing laws and rules that affect the business and financial
communities. The level of trading and market-making activity can be affected
not only by such legislation or regulations of general applicability, but also
by industry-specific legislation or regulations.

45
<PAGE>

The Company's market-making activities involve securities traded in NASDAQ.
NASDAQ's operations have been the subject of extensive scrutiny in the media
and by government regulators, including the Antitrust Division of the United
States Department of Justice. This scrutiny has included allegations of
collusion among NASDAQ market makers. In fact, a large group of NASDAQ market
makers including Spear, Leeds & Kellogg/Troster Singer, a former employer of
Messrs. Pasternak, Raquet and Steinman, recently entered into a Stipulation
and Order with the Department of Justice in which they agreed not to engage in
any collusive activities relating to prices, quotes or spreads in NASDAQ-
traded securities. In August 1996, the SEC adopted certain new rules and rule
amendments, known as the Order Handling Rules, which significantly altered the
manner in which orders related to both NASDAQ and listed securities are
handled. The implementation of these rules began in January 1997. The SEC has
also issued for comment certain proposed rules by the NASD which, if approved,
would introduce a new system for delivering and executing orders in NASDAQ.
The proposed NASD rules, if approved, along with other potential regulatory
actions and improvements in technology, could impact the manner in which
business is currently conducted in NASDAQ. These new rules, regulatory
actions, and changes in market customs and practices could have a material
adverse effect on the Company's business, financial condition and operating
results.

NET CAPITAL REQUIREMENTS

As registered broker-dealers and members of the NASD, the Company's
subsidiaries are subject to the Net Capital Rule. The Net Capital Rule, which
specifies minimum net capital requirements for registered brokers-dealers, is
designed to measure the general financial integrity and liquidity of a broker-
dealer and requires that at least a minimum part of its assets be kept in
relatively liquid form. In general, net capital is defined as net worth
(assets minus liabilities), plus qualifying subordinated borrowings and
certain discretionary liabilities, and less certain mandatory deductions that
result from excluding assets that are not readily convertible into cash and
from valuing conservatively certain other assets. Among these deductions are
adjustments (called "haircuts"), which reflect the possibility of a decline in
the market value of an asset prior to disposition.

Failure to maintain the required net capital may subject a firm to
suspension or revocation of registration by the SEC and suspension or
expulsion by the NASD and other regulatory bodies and ultimately could require
the firm's liquidation. The Net Capital Rule prohibits payments of dividends,
redemption of stock, the prepayment of subordinated indebtedness and the
making of any unsecured advance or loan to a stockholder, employee or
affiliate, if such payment would reduce the firm's net capital below required
levels.

The Net Capital Rule also provides that the SEC may restrict for up to 20
business days any withdrawal of equity capital, or unsecured loans or advances
to stockholders, employees or affiliates ("capital

46
<PAGE>

withdrawal"), if such capital withdrawal, together with all other net capital
withdrawals during a 30-day period, exceeds 30% of excess net capital and the
SEC concludes that the capital withdrawal may be detrimental to the financial
integrity of the broker-dealer. In addition, the Net Capital Rule provides
that the total outstanding principal amount of a broker-dealer's indebtedness
under certain subordination agreements, the proceeds of which are included in
its net capital, may not exceed 70% of the sum of the outstanding principal
amount of all subordinated indebtedness included in net capital, par or stated
value of capital stock, paid in capital in excess of par, retained earnings
and other capital accounts for a period in excess of 90 days.

A change in the Net Capital Rule, the imposition of new rules or any
unusually large charge against net capital could limit those operations of the
Company that require the intensive use of capital and also could restrict the
Company's ability to withdraw capital from its broker-dealer subsidiaries,
which in turn could limit the Company's ability to pay dividends, repay debt
and repurchase shares of its outstanding stock. A significant operating loss
or any unusually large charge against net capital could adversely affect the
ability of the Company to expand or even maintain its present levels of
business, which could have a material adverse effect on the Company's
business, financial condition and operating results.

RISK MANAGEMENT

The Company's market-making and trading activities expose the Company's
capital to significant risks. These risks include, but are not limited to,
absolute and relative price movements, price volatility or changes in
liquidity, over which the Company has virtually no control.

The Company employs an automated proprietary trading and risk management
system which provides real time, on-line risk management and inventory
control. The Company monitors its risks by a constant review of trading
positions. For each trader, the Company has established a system whereby any
trades that exceed pre-determined limits are monitored by senior management as
are individual and aggregate dollar and share position totals and real-time
profits and losses. The management of trading positions is enhanced by review
of mark-to-market valuations and/or position summaries on a daily basis. The
following table illustrates the number of trading days the Company earned net
trading revenues or net trading losses for the respective periods.

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------- ---------------
1996 1997 1998
------------- -------------- ---------------
DAILY DAILY DAILY
DAYS AVERAGE DAYS AVERAGE DAYS AVERAGE
---- -------- ---- --------- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Daily trading revenues.......... 252 $730,010 252 $ 895,338 61 $1,032,895
Daily trading losses............ 2 (34,439) 1 (997,755) -- --
--- -------- --- --------- --- ----------
Average daily net trading
revenues..................... $723,991 $ 887,855 $1,032,895
======== ========= ==========
Total days.................... 254 253 61
=== === ===
</TABLE>

The Company takes long and short positions in securities in which it makes a
market. The following table illustrates, for the period indicated, the
Company's average, highest and lowest month-end inventory at market value
(based on both the aggregate and the net of the long and short positions of
trading securities).

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------------------------- ------------------------
1996 1997 1998
----------------------- ----------------------- ------------------------
AGGREGATE AGGREGATE AGGREGATE OF
OF LONG AND NET OF LONG OF LONG AND NET OF LONG LONG AND NET OF LONG
SHORT AND SHORT SHORT AND SHORT SHORT AND SHORT
POSITIONS POSITIONS POSITIONS POSITIONS POSITIONS POSITIONS
----------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Average month-end....... $48,010,762 $15,833,096 $73,545,271 $20,946,420 $ 96,365,617 $13,855,650
Highest month-end....... 65,802,039 27,759,237 84,466,227 40,665,188 118,071,197 21,598,757
Lowest month-end........ 37,865,308 8,968,927 56,988,279 11,535,551 74,539,279 8,908,909
</TABLE>

47
<PAGE>

PROPERTIES

The Company's headquarters are located in Jersey City, New Jersey. The
Company leases approximately 52,000 square feet under a lease which expires in
March 2005. The Company has an option to extend the lease term on three floors
for an additional five-year period. The Company also leases approximately
24,000 square feet for its offices in Purchase, NY, Chicago, IL and Boston,
MA. The Company believes that its present facilities, together with its
current options to extend lease terms and occupy additional space, are
adequate for its current needs.

LEGAL PROCEEDINGS

The Company is not currently a party to any legal proceedings, the adverse
outcome of which, individually or in the aggregate, could have a material
adverse effect on its business, financial condition or operating results. The
Company and certain of its officers and employees have been subject to legal
proceedings in the past and may be subject to legal proceedings in the future.
See "Risk Factors--Government Regulation."

48
<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Steven L. Steinman...... 50 Chairman of the Board of Directors
Kenneth D. Pasternak.... 44 President, Chief Executive Officer and Director
Walter F. Raquet........ 53 Executive Vice President and Director
Robert I. Turner........ 46 Executive Vice President, Chief Financial Officer,
Treasurer and Director
Robert M. Lazarowitz.... 42 Executive Vice President and Director
Anthony M. Sanfilippo... 42 Executive Vice President and Director
Michael T. Dorsey....... 42 Senior Vice President, General Counsel and Secretary
Simon D. Spenser........ 38 Senior Vice President, Chief Strategy and Technology Officer
Martin Averbuch(1)...... 46 Director
Charles V. Doherty(1)... 64 Director
Gene L. Finn(1)......... 65 Director
Gary R. Griffith(2)..... 58 Director
Bruce R. McMaken(2)..... 38 Director
J. Joe Ricketts......... 56 Director
Rodger O. Riney......... 52 Director
V. Eric Roach........... 35 Director
Charles A. Zabatta...... 55 Director
</TABLE>
- --------
(1) Member of Compensation Committee
(2) Member of Audit Committee

Steven L. Steinman, Chairman of the Board of Directors of the Company, has
more than 20 years of experience in the securities industry. For the past 12
years, Mr. Steinman has been the Chief Executive Officer of Trimark
Securities, L.P., which he founded in 1986. Mr. Steinman is a co-founder of
the LLC, along with Messrs. Pasternak, Raquet and Lazarowitz, and has served
as the Chairman of the LLC for the past three years. Before founding Trimark
Securities, L.P., Mr. Steinman held trading positions at a number of trading
firms including Troster Singer and M.H. Meyerson & Co., Inc., and was Trading
Room Manager for Stix Friedman and Co., Gattini & Co., Traubner Bach Co. Inc.
and Monvest Securities. Mr. Steinman attended Columbia University.

Kenneth D. Pasternak, President, Chief Executive Officer and Director of the
Company, has 20 years of experience in the securities industry. For the past
three years, Mr. Pasternak has been the President, Chief Executive Officer and
a trading room supervisor for Knight Securities, L.P. Before co-founding the
LLC and Knight Securities, L.P., Mr. Pasternak served as the Senior Vice
President, Limited Partner and Trading Room Manager for Spear Leeds &
Kellogg/Troster Singer, a trading firm from July 1979 to July 1994.
Mr. Pasternak received his B.A. degree from the State University of New York
at New Paltz in 1976.

Walter F. Raquet, Executive Vice President and Director of the Company and
Chief Operating Officer of Knight, has 30 years of experience in the
securities industry. For the past three years, Mr. Raquet has been a Managing
Director and the Chief Operating Officer of Knight Securities, L.P. Mr. Raquet
was one of the co-founders of the LLC and Knight. From 1992 to 1994, he was a
Senior Vice President with Spear, Leeds & Kellogg/Troster Singer managing
their technology and marketing functions. From 1982 to 1992, Mr. Raquet was a
Partner at Herzog Heine & Geduld, Inc., a trading firm, where he directed the
firm's technology and marketing efforts. Mr. Raquet was also Corporate
Controller for PaineWebber Incorporated between 1980 and 1982. He was
Executive Vice President of Cantor Fitzgerald from 1977 to 1980 and Controller
for

49
<PAGE>

Weeden & Co. from 1968 to 1976. He has a CPA and practiced at the accounting
firm of Price Waterhouse. Mr. Raquet received a B.S. degree in Accounting from
New York University in 1966.

Robert I. Turner, Executive Vice President, Chief Financial Officer,
Treasurer and Director of the Company and Chief Financial Officer of Knight,
has 20 years of experience in the financial services and securities
industries. For the past three years, Mr. Turner has served as the Chief
Financial Officer for Knight and in April 1996 he was elected to the advisory
board of the LLC. From 1988 to 1995, Mr. Turner was a Corporate Vice President
at PaineWebber Incorporated, serving in a variety of financial management
positions in the fixed income, financial services, merchant banking and
commodities trading divisions. From 1982 to 1987, Mr. Turner worked for
Citicorp in the treasury and investment banking divisions. From 1979 to 1981,
Mr. Turner practiced at the accounting firm of Price Waterhouse where he
became a CPA. Mr. Turner received his B.A. from the State University of New
York at Binghamton in 1973 and his M.S.B.A. from the University of
Massachusetts at Amherst in 1976.

Robert M. Lazarowitz, Executive Vice President and Director of the Company
and Chief Operating Officer of Trimark, has 20 years of experience in the
securities and financial services industries. For the past 10 years, Mr.
Lazarowitz served first as Chief Financial Officer and then as Chief Operating
Officer of Trimark Securities, L.P. Mr. Lazarowitz was also a co-founder of
the LLC. From 1985 to 1987, he served as Chief Financial Officer of Bach
Management/Investment Banking, and, from 1984 to 1985, as Chief Operating
Officer of Traubner Bach Co. Inc. He has been a member of the NASD's
Intermarket Trading System Committee for the past three years. Mr. Lazarowitz
received his B.S. in Accounting from the University of South Florida in 1978.

Anthony M. Sanfilippo, Executive Vice President and Director of the Company
and President of Trimark, has over 22 years of experience in the securities
industry. For the past year, he has been the President of Trimark Securities,
L.P. From 1993 to 1997, Mr. Sanfilippo was President and Chief Executive
Officer of Tradetech Securities, a market maker in the Third Market which he
founded in 1993. From 1988 to 1993, he served as Executive Vice President at
Mesirow Financial, managing the Institutional Equity Division and Regional
Exchange Specialist Operations. From 1980 to 1986, he was Vice President of
Jefferies & Co., an investment bank where he co-managed the firm's capital
commitments in listed securities. Mr. Sanfilippo is a member of the National
Organization of Investment Professionals. He has also served as President of
the Security Traders Association of Chicago and is currently serving on the
NASDR Business District Conduct Committee. Mr. Sanfilippo attended DePaul
University.

Michael T. Dorsey, Senior Vice President, General Counsel and Secretary of
the Company, joined the Company in March 1998. From June 1994 to March 1998,
Mr. Dorsey served as the Chief Legal Officer to Prudential Investment
Management Services LLC and its predecessor, in the institutional money
management unit of The Prudential Insurance Company of America. From March
1986 until June 1994, Mr. Dorsey served as an attorney in the SEC's Division
of Market Regulation, holding various posts including Special Counsel to the
Assistant Director and then Branch Chief of the Office of Compliance
Inspections and Oversight. Mr. Dorsey received a B.S.B.A. in Finance from St.
Louis University in 1981, a J.D. from the University of Missouri-Columbia in
1984 and an LL.M. in Securities Regulations from Georgetown University Law
Center in 1989. Mr. Dorsey is admitted to the Missouri and Illinois state
bars.

Simon D. Spenser, Senior Vice President and Chief Strategy and Technology
Officer, joined the Company in April 1998. From 1993 to 1998, Mr. Spenser
served as the Senior Vice President of D.E. Shaw & Co., where he headed the
firm's third market division and participated in the development of other
customer-based securities businesses. From 1992 to 1993, Mr. Spenser worked
for TCAM Systems, Inc. where he was responsible for developing and enhancing
proprietary trading software for securities firms active in the third market.
Prior to that, Mr. Spenser designed custom computer and telecommunication
software for a London-based software development firm. Mr. Spenser graduated
from University College, London in 1981 with a BSc in Physics and spent four
years conducting postgraduate research in the Astrophysics Department at
Oxford University.

50
<PAGE>

Martin Averbuch, Director of the Company, has served as an advisory board
member of the LLC since 1996. From 1993 until the present, Mr. Averbuch has
served in various positions at E*TRADE Group, Inc., including President of
E*TRADE Capital, Vice President On-Line Ventures, and Vice President, Special
Projects. Mr. Averbuch is also a member of the TAG Industry Advisory Board on
Execution Quality. Mr. Averbuch was a member of the Hofstra University faculty
from 1977 to 1978 as a Professor in the Finance Department. He received a B.S.
in Economics, magna cum laude, from The Wharton School of Business at the
University of Pennsylvania in 1974 and a J.D./M.B.A. from the University of
Chicago in 1977.

Charles V. Doherty, Director of the Company, has served as an advisory board
member of the LLC since March 1995. He has also been a Managing Director of
Madison Asset Group, an investment advisory firm, since 1993. From 1986 to
1992, Mr. Doherty was President and Chief Operating Officer of the Chicago
Stock Exchange specializing in information technology, marketing, floor
operations and compliance. He is a CPA and founder of Doherty, Zable &
Company, an accounting firm, where he served as President between 1974 to
1985. Mr. Doherty received his B.A. in Accounting, magna cum laude, from the
University of Notre Dame in 1955 and his M.B.A. from the University of Chicago
in 1967.

Gene L. Finn, Director of the Company, has served as an advisory board
member of the LLC since March 1995. He served as Vice President and Chief
Economist of the NASD from 1983 to 1995 and as Chief Economist and Senior
Economic Adviser for the SEC from 1969 to 1982. In such capacities, Mr. Finn
provided policy advice on stock market and investment company regulation and
oversight. Mr. Finn is an independent consultant and has been a Director of
Ameritrade Holding Corporation since December 1996. Mr. Finn holds a Ph.D. in
Economics from the University of Wisconsin.

Gary R. Griffith, Director of the Company, has served as an advisory board
member of the LLC since March 1995. He has been an independent financial
consultant since 1990 and has been in investment banking and financial
consulting since 1980. Before 1980, Mr. Griffith was with CBS, Inc. and Price
Waterhouse. Mr. Griffith is a CPA. Mr. Griffith received a B.S. in Business
Administration from Ohio State University.

J. Joe Ricketts, Director of the Company, is Chairman and Chief Executive
Officer of Ameritrade Holding Corporation. Mr. Ricketts has been with
Ameritrade since 1975. Previously, Mr. Ricketts was an investment advisor with
Ricketts & Co., a registered representative with Dean Witter, and a branch
manager at Dun & Bradstreet. Mr. Ricketts is a member of the Board of
Directors of Creighton University, a director of CSS Management, Inc. of
Denver, Colorado and a member of the District Business Conduct Committee of
the NASD, District No. 4. He received his B.A. degree in economics from
Creighton University in Omaha, Nebraska.

Bruce R. McMaken, Director of the Company, has been an advisory board member
of the LLC since March 1995. He also has been employed by Sanders Morris Mundy
("SMM"), an investment banking firm, since 1992, currently serving as a
Managing Director of Corporate Finance. Mr. McMaken serves as one of the
managers of Environmental Opportunities Fund, Ltd., a $38 million private
equity fund managed by an affiliate of SMM. Before joining SMM, Mr. McMaken
provided independent corporate finance and venture capital advisory services
to clients primarily in the environmental services, biotechnology and real
estate development industries. He is also a director of Independent
Environmental Services, Inc., a private solid waste collection and disposal
company. He received his B.A. degree from Cornell University in 1981.

Rodger O. Riney, Director of the Company, has been an advisory board member
of the LLC since March 1995. He is also the President of Scottsdale
Securities, Inc., a discount brokerage firm he founded in 1980. In 1969, he
joined Edward Jones & Co., a brokerage firm, and in 1975 became a General
Partner of that firm. Mr. Riney received a B.S. degree in Civil Engineering in
1968 and an M.B.A. in 1969, both from the University of Missouri-Columbia.

V. Eric Roach, Director of the Company, has served as an advisory board
member of the LLC since 1995. He founded Lombard Brokerage, a brokerage firm,
in 1992 and was Chairman and Chief Executive Officer

51
<PAGE>

until Dean Witter, Discover & Co. acquired the company in 1997. He is
President of Discover Brokerage Direct, a 100%-owned subsidiary of Morgan
Stanley Dean Witter, managing the company's strategy, marketing and public
relations areas. He attended Brigham Young University and also attended the
Executive M.B.A. program of Pepperdine University.

Charles A. Zabatta, Director of the Company, is President and Chief
Operating Officer of Wall Street Connect, a national financial services
company. He has over 30 years of brokerage experience, having recently served
as Executive Vice President of Corporate Development at Waterhouse Investor
Services and Executive Vice President of Marketing at Kennedy Cabot & Co. He
also served as Director of Marketing for Securities Settlement, a national
clearing organization. He received his B.A. degree from Iona College in 1964.

BOARD COMMITTEES

The Board of Directors has created an Audit Committee and a Compensation
Committee of the Board. The Audit Committee was established in April, 1998 and
is charged with reviewing the Company's annual audit and meeting with the
Company's independent accountants to review the Company's internal controls
and financial management practices. As of the date of this Prospectus, the
Audit Committee is composed of Gary R. Griffith, Charles A. Zabatta and Bruce
R. McMaken. The Compensation Committee, was established in April 1998, and is
charged with recommending to the Board of Directors compensation for the
Company's key employees and will administer the 1998 Stock Option and Award
Plan. As of the date of this Prospectus, the Compensation Committee is
composed of Martin Averbuch, Charles V. Doherty and Gene L. Finn. See "--
Executive Compensation."

DIRECTOR COMPENSATION

Non-employee directors will receive $18,000 per year, with committee
chairpersons receiving an additional $3,000 per year, in addition to $1,000
for each Board or Committee Meeting attended. Each non-employee director will
receive stock options pursuant to the automatic option grant provisions of the
Company's Stock Incentive Plan. See "--Executive Compensation." All directors
will receive reimbursement of reasonable out-of-pocket expenses incurred in
connection with meetings of the Board of Directors. No director who is an
employee of the Company will receive compensation for services rendered as a
director.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During 1997, and prior to the formation of the Compensation Committee,
decisions concerning the compensation of executive officers were made by the
entire Board of Directors. As of the date of this Prospectus, the Company's
Compensation Committee consists of Messrs. Averbuch, Doherty and Finn, none of
whom has ever been an officer or employee of the Company. No executive officer
of the Company serves as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving as a
member of the Company's Board of Directors or Compensation Committee. Certain
members of the Company's Board of Directors are parties to transactions with
the Company. See "Certain Transactions."

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The Company utilizes certain provisions in Delaware corporate law to limit
the liability of corporate officers and directors. The Company believes that
the provisions of its Certificate of Incorporation and Bylaws and the separate
indemnification agreements outlined below are necessary to attract and retain
qualified persons as directors and officers. The Company's Certificate of
Incorporation limits the liability of directors to the maximum extent
permitted by Delaware law. This provision is intended to allow the Company's
directors the benefit of Delaware General Corporation Law, which provides that
directors of Delaware corporations may be relieved of monetary liabilities for
breach of their fiduciary duties as directors, except under certain
circumstances, including breach of their duty of loyalty, acts or omissions
not in good faith or involving

52
<PAGE>

intentional misconduct or a knowing violation of law, unlawful payments or
dividends or unlawful stock repurchases or redemptions or any transaction from
which the director derived an improper personal benefit. The Company's Bylaws
provide that the Company shall indemnify officers and directors to the fullest
extent provided by Delaware law. The Bylaws authorize the use of
indemnification agreements and the Company intends to enter into such
agreements with each of its directors and executive officers.

The Company intends to obtain officer and director liability insurance with
respect to liabilities arising out of certain matters, including matters
arising under the Securities Act.

There is no pending litigation or proceeding involving a director, officer,
associate or other agent of the Company as to which indemnification is being
sought, nor is the Company aware of any threatened litigation that may result
in claims for indemnification by any director, officer, associate or other
agent.

EXECUTIVE COMPENSATION

The following table sets forth all compensation awarded to Kenneth
Pasternak, the Company's Chief Executive Officer, and the Company's four other
most highly compensated executive officers (together with the Chief Executive
Officer, the "Named Executive Officers") for services rendered in all
capacities to the Company in 1997.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------------------
NAME AND ALL OTHER
PRINCIPAL POSITION SALARY($) BONUS($)(1)(2) COMPENSATION($)(3)
- ------------------ --------- -------------- ------------------
<S> <C> <C> <C>
Kenneth Pasternak, President and
Chief Executive Officer......... 250,000 3,084,742(4) 5,421,289
Steven Steinman, Chairman of the
Board of Directors.............. 250,000 780,936 5,421,289
Walter Raquet, Executive Vice
President....................... 250,000 1,219,788 5,421,289
Robert Turner, Executive Vice
President, Chief Financial
Officer and Treasurer........... 140,576 379,708 4,750
Robert Lazarowitz, Executive Vice
President....................... 250,000 872,038 5,421,289
</TABLE>
- --------
(1) Includes discretionary incentive cash bonuses paid pursuant to the
Incentive Plan described below.
(2) The columns for "Long-Term Compensation Awards" and "Other Annual
Compensation" have been omitted because there is no compensation required
to be reported in such columns.
(3) Includes self-employment earnings reported on Form K-1 for the LLC, as
well as $4,750 contributed on behalf of each of the executive officers by
the Company under the Company's 401(k) defined contribution plan.
(4) Includes $60,025 paid as trading compensation to Mr. Pasternak for fiscal
1997.

53
<PAGE>

KNIGHT/TRIMARK GROUP, INC. 1998 LONG-TERM INCENTIVE PLAN. The Company, with
the approval of its stockholders, has adopted the 1998 Long-Term Incentive
Plan (the "1998 Plan"). The 1998 Plan will take effect prior to the
consummation of this Offering. A maximum of 7,145,000 shares of Common Stock
has been reserved for issuance under the 1998 Plan, subject to equitable
adjustment upon the occurrence of any increase in, decrease in or exchange of
the outstanding shares of Common Stock through merger, consolidation,
recapitalization, reclassification, stock split, stock dividend or similar
corporate transaction.

The 1998 Plan will be administered by a committee established by the Board
of Directors, the composition of which will at all times satisfy the
provisions of Rule 16b-3 of the Securities Exchange Act of 1934, as in effect
from time to time, including any successor thereof (the "Committee"). The
Committee will have full authority, subject to the provisions of the 1998
Plan, to determine, among other things, the persons to whom awards under the
1998 Plan ("Awards") will be made, the size of such Awards, and the specific
terms and conditions applicable to Awards, including, but not limited to, the
duration, vesting and exercise or other realization periods, the circumstances
for forfeiture and the form and timing of payment. The 1998 Plan limits the
number of shares of Common Stock that may be the subject of Awards to any
grantee in any calendar year to 1 million.

Awards, including stock options ("Options"), restricted stock ("Restricted
Stock"), and restricted stock units ("Restricted Stock Units"), may be made
under the 1998 Plan to selected employees and independent contractors of the
Company and its present or future subsidiaries and affiliates, in the
discretion of the Committee. Substantially all employees of the Company will
be eligible to receive Awards under the 1998 Plan. Stock options may be either
"incentive stock options," as such term is defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or nonqualified stock
options. The exercise price of an Option will not be less than the fair market
value per share of Common Stock on the date of grant. The exercise price of an
Option may be paid in cash or Common Stock or pursuant to a "broker's cashless
exercise" or other similar arrangement approved by the Committee. Options will
have a term of not more than ten years, will become exercisable at such times
and upon such terms as the Committee may determine, and may be exercised
following termination of employment as determined by the Committee in the
document evidencing the Award.

Restricted Stock is Common Stock transferred to the grantee, generally
without payment to the Company, which shares are subject to certain
restrictions and to a risk of forfeiture. A Restricted Stock Unit is a right
to receive shares of Common Stock or cash at the end of a specified period,
subject to a risk of forfeiture. The vesting of Restricted Stock and
Restricted Stock Units may be conditioned upon the satisfaction of specified
performance criteria. The maximum number of shares of Common Stock that may be
awarded as Restricted Stock under the 1998 Plan is 500,000.

In the event of a "change of control" (as defined in the 1998 Plan), (i) any
Award carrying a right to exercise that was not previously exercisable and
vested will become fully exercisable and vested, (ii) the restrictions,
deferral limitations, payment conditions and forfeiture conditions applicable
to any other Award granted under the 1998 Plan will lapse and such Award will
be deemed fully vested, and (iii) any performance conditions imposed with
respect to Awards will be deemed to be fully achieved.

The 1998 Plan may, at any time and from time to time, be altered, amended,
suspended, or terminated by the Board of Directors, in whole or in part,
provided that no amendment that, in the opinion of counsel, requires
stockholder approval will be effective unless such amendment has received the
requisite approval of stockholders. In addition, no amendment may be made that
adversely affects any of the rights of a grantee under any Award theretofore
granted, without such grantee's consent.

Set forth below is a brief discussion of certain federal income tax
consequences relating to Awards that may be granted pursuant to the 1998 Plan.

Nonqualified Stock Options. In the case of a nonqualified stock option, an
option holder generally will not be taxed upon the grant of the option.
Rather, at the time of exercise of such nonqualified stock option,

54
<PAGE>

the option holder will generally recognize ordinary income for federal income
tax purposes in an amount equal to the excess of the then fair market value of
the shares purchased over the option price (the "Spread"). The Company will
generally be entitled to a tax deduction at the time and in the amount that
the holder recognizes ordinary income.

Incentive Stock Options. In the case of an incentive stock option, the tax
recognition event will generally occur upon the disposition of the shares
acquired upon exercise of the incentive stock option, rather than upon the
grant of the incentive stock option or upon its exercise within the
employment-related period prescribed by the Code for this purpose ("timely
exercise"). The Spread will, however, be an item of tax adjustment for
purposes of the "alternative minimum tax" imposed by Section 55 of the Code.
If, upon disposition of the shares acquired upon exercise, the special holding
period requirements prescribed in the Code with respect to incentive stock
options have been satisfied (a "Qualifying Disposition"), any taxable income
will constitute capital gain in an amount equal to the excess of the sale
proceeds over the exercise price. The Company will not be entitled to a tax
deduction with respect to the timely exercise of an incentive stock option or
the subsequent Qualifying Disposition of shares so acquired. The tax
consequences of any untimely exercise of an incentive stock option or non-
Qualifying Disposition of acquired shares will be determined in accordance
with the rules applicable to nonqualified stock options, as described in the
preceding paragraph, except that, in the case of a non-Qualifying Disposition,
the tax recognition event will occur upon such disposition.

Exercise with Shares. An option holder who pays the option price upon
exercise of an option, in whole or in part, by delivering already owned shares
of stock will generally not recognize gain or loss on the shares surrendered
at the time of such delivery, except under certain circumstances. Rather,
recognition of such gain or loss will generally occur upon disposition of the
shares acquired in substitution for the shares surrendered.

Restricted Stock. Generally, the grant of restricted stock has no federal
income tax consequences at the time of grant. Rather, at the time the shares
are no longer subject to a substantial risk of forfeiture (as defined in the
Code), the holder will recognize ordinary income in an amount equal to the
fair market value of such shares. A holder may, however, elect to be taxed at
the time of the grant. The Company generally will be entitled to a deduction
at the time and in the amount that the holder recognizes ordinary income.

Restricted Stock Units. In the case of Restricted Stock Units, a holder
generally will not be taxed upon the grant of such units or upon the lapse of
restrictions on such units but, rather, will recognize ordinary income in an
amount equal to the value of the shares and cash received at the time of such
receipt. The Company will be entitled to a deduction at the time and in the
amount that the holder recognizes ordinary income.

THE FOREGOING SUMMARY CONSTITUTES A BRIEF OVERVIEW OF THE PRINCIPAL FEDERAL
INCOME TAX CONSEQUENCES RELATING TO THE ABOVE-DESCRIBED AWARDS BASED UPON
CURRENT FEDERAL INCOME TAX LAWS. THIS SUMMARY IS NOT INTENDED TO BE EXHAUSTIVE
AND DOES NOT DESCRIBE STATE, LOCAL OR FOREIGN TAX CONSEQUENCES. PARTICIPANTS
IN THE 1998 PLAN SHOULD CONSULT THEIR PERSONAL TAX ADVISORS TO DETERMINE THE
SPECIFIC TAX CONSEQUENCES TO THEM OF AWARDS AND OTHER TRANSACTIONS RELATING
THERETO.

KNIGHT/TRIMARK GROUP, INC. 1998 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN. The
Company, with the approval of its stockholders, has adopted the 1998
Nonemployee Director Stock Option Plan (the "Nonemployee Director Plan"). The
Nonemployee Director Plan will take effect upon, and only in the event of, the
consummation of this Offering. A maximum of 264,000 shares of Common Stock
have been reserved for issuance under the Nonemployee Director Plan, subject
to equitable adjustment upon the occurrence of any increase in, decrease in or
exchange of the outstanding shares of Common Stock through merger,
consolidation, recapitalization, reclassification, stock split, stock dividend
or similar corporate transaction.

Under the Nonemployee Director Plan, any questions of administration that
arise will be resolved by the Board of Directors. Approximately eight
directors will be eligible to receive awards under the Plan. All stock options
granted under the Nonemployee Director Plan ("Director Options") will be
nonqualified stock options.

55
<PAGE>

A Director Option to purchase 8,000 shares of Common Stock will be granted
upon the effective date of the Nonemployee Director Plan to each then
Nonemployee Director and, thereafter, to each new Nonemployee Director upon
election to the Board of Directors. In addition, on the first business day
following each annual meeting of the Company's stockholders, each continuing
Nonemployee Director will be granted a Director Option to purchase 4,000
shares of Common Stock. The exercise price of a Director Option will be the
fair market value per share of Common Stock on the date of grant and may be
paid in cash or Common Stock or pursuant to a "broker's cashless exercise."
Director Options will have a term of ten years, will become exercisable in
four equal annual instalments commencing with the first anniversary of the
date of grant, and may be exercised following a director's termination of
service, as determined by the Board of Directors in the document evidencing
the grant.

In the event of a "change of control" (as defined in the Nonemployee
Director Plan), any outstanding Director Options not yet exercisable in whole
or in part will become exercisable in full.

The Nonemployee Director Plan may, at any time and from time to time, be
altered, amended, suspended, or terminated by the Board of Directors, in whole
or in part; provided that no amendment that, in the opinion of counsel,
requires stockholder approval will be effective unless such amendment has
received the requisite approval of stockholders. In addition, no amendment may
be made that adversely affects any of the rights of a grantee under any
Director Option theretofore granted, without such grantee's consent.

For a discussion of certain federal income tax consequences relating to
options granted pursuant to the Nonemployee Director Plan, see "Knight/Trimark
Group, Inc. 1998 Long-Term Incentive Plan."

KNIGHT/TRIMARK GROUP, INC. MANAGEMENT INCENTIVE PERFORMANCE PLAN. The
Company has established a profit-pool incentive plan (the "Incentive Plan"),
currently consisting of three sub-profit pools, one for the Company
(disregarding its subsidiary companies)(the "Company Sub-Pool"), one for
Knight (the "Knight Sub-Pool") and one for Trimark (the "Trimark Sub-Pool").
The Incentive Plan also provides for the creation of a new sub-pool at the
time of each future formation or acquisition of a new Company subsidiary, to
be allocated by such person or persons as determined by a committee of the
Board of Directors consisting of its executive officers (the "Executive
Board").

The annual Company Sub-Pool will equal 15% of the before-tax profits of the
Company (on an unconsolidated basis) earned by the Company during each fiscal
quarter (not taking into account amounts paid out pursuant to the Incentive
Plan) and will be allocated on a quarterly basis by the Chief Executive
Officer of the Company. The annual Knight Sub-Pool equals 15% of the before-
tax profits earned by Knight during each fiscal quarter (not taking into
account amounts paid out pursuant to the Incentive Plan), and is allocated on
a quarterly basis by the President, Chief Executive Officer and Chief
Operation Officer of Knight. The annual Trimark Sub-Pool equals 15% of the
before-tax profits earned by Trimark during each fiscal quarter (not taking
into account amounts paid out pursuant to the Incentive Plan), and is
allocated on a quarterly basis by the President, Chief Executive Officer and
Chief Operation Officer of Trimark. Such officers may not themselves receive
an allocation from any sub-profit pool in any year unless the entire Company,
on a consolidated basis, earns a before-tax profit (not taking into account
amounts paid out pursuant to the Incentive Plan).

401(K) PLAN

The Company has a Section 401(k) Plan (the "401(k) Plan"), a tax-qualified
plan covering substantially all of the Company's employees. Under the terms of
the 401(k) Plan, participants may elect to defer a portion of their
compensation, subject to certain limitations, and the Company is required to
make annual contributions to the 401(k) Plan equal to 50% of the contributions
made by its employees, subject to certain limitations.

EMPLOYMENT AGREEMENTS

The Company has entered into a new employment agreement substantially the
same as the current LLC employment agreement with Mr. Pasternak and has
amended the current LLC agreements of Messrs. Raquet,

56
<PAGE>

Steinman and Lazarowitz, and the prior Trimark employment agreement with Mr.
Sanfilippo (collectively, the "Executives"). The term of Mr. Pasternak's
agreement (the "New Agreement") will be four (4) years, beginning on the date
of the consummation of the Offering, with annual, automatic one-year
extensions beginning on the fourth anniversary of such date unless either
party gives notice of nonrenewal at least 60 days prior to such anniversary.
The term of the amended agreements of the remaining Executives (the "Amended
Agreements") ends on March 23, 2000, subject to annual automatic one-year
extensions beginning on such date, unless either party serves notice of
nonrenewal at least 60 days prior to such date.

Mr. Pasternak's New Agreement provides that he will be President and Chief
Executive Officer of the Company and President and Chief Executive Officer of
Knight. Each of Messrs. Raquet and Lazarowitz's Amended Agreements provides
that the Executive will be Executive Vice President of the Company; Mr. Raquet
will also be Chief Operating Officer of Knight and Mr. Lazarowitz will also be
Chief Operating Officer of Trimark. Mr. Steinman's Amended Agreement provides
that he will be Chairman of the Board of the Company and Chief Executive
Officer of Trimark. Mr. Sanfilippo's Amended Agreement provides that he will
be Executive Vice President of the Company and President of Trimark. Each
Executive will receive an annual salary of $250,000, as from time to time
increased by the Board of Directors.

The New Agreement and each of the Amended Agreements provide for the payment
of annual bonuses pursuant to the Incentive Plan (see "Knight/Trimark Group,
Inc. 1998 Incentive Plan,") and for participation in current and future
employee benefit plans. In addition, the New Agreement of Mr. Pasternak and
the Amended Agreement of Mr. Sanfilippo provide for the payment of a sales
commission equal to a percentage (in the case of Mr. Pasternak, 35%; in the
case of Mr. Sanfilippo, a percentage consistent with the Company's other
traders) of the net, before-tax trading profits of the Executive's personal
trading account; and the Amended Agreements of each of Messrs. Steinman and
Lazarowitz provide for the payment of an additional annual bonus until March
31, 2000, equal in each case to 5 percent of the before-tax earnings of
Trimark.

57
<PAGE>

CERTAIN TRANSACTIONS

THE REORGANIZATION

The Company was organized in April 1998 for the purpose of succeeding to the
business of Roundtable Partners, L.L.C. (the "LLC"). Concurrent with the
closing of the Offering, based on an assumed initial public offering price of
$15.00 per share, all of the member interests of the LLC will be exchanged for
36,659,585 shares of Class A Common Stock of the Company and 3,945,528 shares
of Class B Common Stock of the Company. Prior to the Reorganization,
management owned 40% and the broker-dealer owners owned 60% of the LLC. By
agreement among the members of the LLC, the allocation of Common Stock to the
broker-dealer owners is based upon an approximation of the fair market value
of each such broker-dealer owner's interest in the LLC. One broker-dealer
owner of Common Units of the LLC will receive Class B Common Stock in lieu of
Class A Common Stock due to certain regulatory constraints that prevent this
broker-dealer owner from holding any class of voting stock. Certain members of
the LLC, including management, who have so elected, will receive 1,741,581
additional shares of Class A Common Stock valued at the initial public
offering price with respect to their share of the undistributed income of the
LLC through March 31, 1998 (the "Undistributed Profits"). Management of the
Company has elected to receive shares of Class A Common Stock for all of its
Undistributed Profits. The Company will receive no additional consideration in
connection with such conversion of member interests into shares of Common
Stock. In connection with the Reorganization, Knight will become the successor
entity to Knight Securities, L.P., and Trimark will become the successor
entity to Trimark Securities, L.P. Prior to the effective date of the
Registration Statement of which this Prospectus is a part, certain non-
management members of the LLC, who have so elected, will receive a cash
distribution of all or a portion of their Undistributed Profits. Concurrently
with such distributions, the LLC intends to make a cash distribution to each
member of an estimate of its share of the total amount of profits of the LLC
accruing between April 1, 1998 and the closing of this Offering. Such
estimated cash distributions to members of the LLC is currently estimated to
be $16.4 million (based on operating results through May 31, 1998).

BROWN & COMPANY SECURITIES CORPORATION

On April 24, 1996, the Company entered into a $500,000 subordinated note
agreement with Brown & Company Securities Corporation ("Brown"), a major
customer of the Company, which pays interest quarterly at a market rate
approximating the prevailing Federal Funds Rate. The subordinated note matures
on April 23, 1999, but may be prepaid by the Company at any time without
penalty. Concurrent with the execution of the subordinated note, the Company
granted Brown certain benefits, including the right to receive additional
payments based on the amount of order flow provided to the Company by Brown.
For the period from March 27, 1995 through December 31, 1995, the years ended
December 31, 1996 and 1997, and for the three-months ended March 31, 1998,
Brown was the source of 4.0%, 4.6%, 4.3% and 4.1%, respectively, of the
Company's order flow. Payments by the Company to Brown during these periods
amounted to $2.1 million, $6.2 million, $7.5 million and $1.7 million,
respectively. Additionally, in April 1996, the Company granted Brown the right
to purchase 7,143 Common Units in the LLC at the then prevailing market price
of $10.00 per Common Unit (the "Brown Option"). As of the date of grant, the
right to purchase the Common Units had a de minimis value. Brown has elected
to exercise the Brown Option at the closing of the Offering. Upon the closing
of the Offering, Brown will own 394,887 shares of the Company's Class A Common
Stock. The aggregate exercise price for the Brown Option is $71,430.

TRANSACTIONS WITH AFFILIATES

Transactions with Affiliates. Immediately prior to the Reorganization, 60%
of the Common Units of the LLC will be owned by a consortium of 27 broker-
dealers or their affiliates. After the closing of this Offering, such broker-
dealer owners will own 48.5% of the Company's Common Stock (47.2% if the
Underwriters' over-allotment option is exercised in full).

58
<PAGE>

Set forth below is a list of the Company's broker-dealer owners as of March
31, 1998:

<TABLE>
<S> <C> <C>
Ameritrade Inc. E*TRADE Securities, Inc. Dain Rauscher Incorporated
BHC Securities, Inc. Fiserv Correspondent Services, Inc. R.J. Forbes Group, Inc.
BHF Securities Corp. Gruntal & Co., L.L.C. Sanders Morris Mundy Inc.
Bidwell & Company Howe Barnes Investments, Inc. Scottsdale Securities, Inc.
Burke, Christensen &
Lewis Securities International Correspondents Trading, Inc. Southwest Securities, Inc.
Cowles, Sabol & Co.,
Inc. J.W. Charles Securities, Inc. Stockcross, Inc.
David A. Noyes & Co. Josephthal & Co. Inc. Thomas F. White & Co.
Direct Access Brokerage
Services, Inc. Nathan & Lewis Securities, Inc. Van Kasper & Company
Discover Brokerage
Direct Primevest Financial Services, Inc. Waterhouse Securities, Inc.
</TABLE>

For the period from March 27, 1995 through December 31, 1995, the years
ended December 31, 1996 and 1997, and the three-months ended March 31, 1998,
the broker-dealer owners and subordinated note holders were the source of
31.3%, 35.1%, 39.8% and 41.3% of the Company's order flow, respectively. For
the period from March 27, 1995 through December 31, 1995, the years ended
December 31, 1996 and 1997, and the three months ended March 31, 1998,
aggregate payments by the Company to its broker-dealer owners and subordinated
note holders for order flow and aggregate profit distributions to broker-
dealer owners equaled $14.4 million and $1.7 million, $46.4 million and $10.6
million, $50.7 million and $13.4 million and $11.3 million and $5.0 million,
respectively. Pursuant to the limited liability company agreement of the LLC,
its broker-dealer owners have shared in the LLC profits partially in
proportion to their equity interest and partially in proportion to the
quantity of order flow they have directed to the Company. This arrangement
will be discontinued upon consummation of the Reorganization.The broker-dealer
owners will no longer receive any special inducements to send order flow to
the Company and will not be contractually or otherwise obligated to provide
the Company with any order flow in the future. Although the Company believes
that, based on the high-quality execution services it provides, these broker-
dealer owners will continue to use the Company's services, there can be no
assurance that the absence of such incentives will not cause the Company's
broker-dealer owners to reduce the level of or discontinue order flow they
direct to the Company in the future. See "Risk Factors--Risks Associated with
Change of Ownership Structure."

Ameritrade. Upon the closing of this Offering, Ameritrade, Inc.
("Ameritrade") will own 3,953,675 shares of the Company's Class A Common
Stock. Mr. J. Joe Ricketts, the Chairman and Chief Executive Officer of
Ameritrade Holding Corporation, an affiliate of Ameritrade, is a Director of
the Company. For the period from March 27, 1995 through December 31, 1995, the
years ended December 31, 1996 and 1997, and the three months ended March 31,
1998, Ameritrade was the source of 6.8%, 5.7%, 5.8% and 8.4%, respectively, of
the Company's order flow. During the same periods, aggregate payments by the
Company to Ameritrade for order flow and profit distributions, respectively,
equalled $3.1 million and $529,000, $8.2 million and $2.7 million, $6.9
million and $2.6 million, and $1.9 million and $972,000, respectively.

Discover Brokerage Direct. Upon the closing of this Offering, Discover
Brokerage Direct, Inc. ("Discover") will own 2,101,963 shares of the Company's
Class A Common Stock. Mr. V. Eric Roach, the President of Discover, is a
Director of the Company. For the period from March 27, 1995 through December
31, 1995, the years ended December 31, 1996 and 1997, and the three months
ended March 31, 1998, Discover was the source of 2.1%, 2.3%, 3.5% and 2.8%,
respectively, of the Company's order flow. During the same periods, aggregate
payments by the Company to Discover for order flow and profit distributions,
respectively, equalled $1.0 million and $185,000, $4.4 million and $964,000,
$5.5 million and $1.3 million, and $954,000 and $394,000, respectively.

E*TRADE. Upon the closing of this Offering, E*TRADE Securities, Inc.
("E*TRADE") will own 2,566,432 shares of the Company's Class A Common Stock.
Mr. Martin Averbuch, the Vice President, Special Projects of E*TRADE Group, an
affiliate of E*TRADE, is a Director of the Company. For the period from March
27, 1995 through December 31, 1995, the years ended December 31, 1996 and
1997, and the three months ended March 31, 1998, E*TRADE was the source of
1.8%, 3.2%, 5.7% and 7.2%, respectively, of the Company's order flow. During
the same periods, aggregate payments by the Company to E*TRADE for order

59
<PAGE>

flow and profit distributions, respectively, equalled $645,000 and $190,000,
$3.5 million and $825,000, $5.3 million and $1.7 million, and $1.3 million and
$545,000, respectively.

Gruntal & Co. After the Reorganization, Gruntal & Co., L.L.C. ("Gruntal")
will own 1,311,754 shares of the Company's Class A Common Stock, all of which
shares are being sold by Gruntal in the Offering. For the period from March
27, 1995 through December 31, 1995, the years ended December 31, 1996 and
1997, and the three months ended March 31, 1998, Gruntal was the source of
1.0%, 0.6%, 0.3% and 0.2%, respectively, of the Company's order flow. During
the same periods, aggregate payments by the Company to Gruntal for order flow
and profit distributions, respectively, equalled $421,000 and $341,000,
$434,000 and $1.2 million, $415,000 and $845,000, and $66,000 and $290,000,
respectively. In addition, from its inception until March 1998, the Company
utilized Gruntal as its clearing broker. For the period from March 27, 1995
through December 31, 1995, the years ended December 31, 1996 and 1997, and the
three months ended March 31, 1998, the Company paid Gruntal clearing fees in
the amount of $11.7 million , $21.5 million, $14.8 million and $1.6 million.
The Company terminated its clearing arrangements with Gruntal as of
March 1998.

Sanders Morris Mundy. Upon the closing of this Offering, Sanders Morris
Mundy Inc. ("SMM") will own 134,566 shares of the Company's Class A Common
Stock. Mr. Bruce R. McMaken, a Managing Director of SMM, is a Director of the
Company. For the period from March 27, 1995 through December 31, 1995, the
years ended December 31, 1996 and 1997, and the three months ended March 31,
1998, SMM was the source of 0.1%, 0.046%, 0.033% and 0.017%, respectively, of
the Company's order flow. During the same periods, aggregate payments by the
Company to SMM for order flow and profit distributions, respectively, equalled
$34,000 and $31,000, $64,000 and $115,000, $45,000 and $85,000, and $3,000 and
$28,000, respectively.

Scottsdale Securities. Upon the closing of this Offering, Scottsdale
Securities, Inc. ("Scottsdale Securities") will own 1,012,097 shares of the
Company's Class A Common Stock. Mr. Rodger O. Riney, the President of
Scottsdale Securities, is a Director of the Company. For the period from March
27, 1995 through December 31, 1995, the years ended December 31, 1996 and
1997, and the three months ended March 31, 1998, Scottsdale Securities was the
source of 0.9%, 1.5%, 1.4% and 1.3%, respectively, of the Company's order
flow. During the same periods, aggregate payments by the Company to Scottsdale
Securities for order flow and profit distributions, respectively, equalled
$662,000 and $170,000, $2.2 million and $798,000, $1.3 million and $649,000,
and $340,000 and $226,000, respectively.

Southwest Securities. Upon the closing of this Offering, Southwest
Securities, Inc. ("Southwest") will own 1,674,850 shares of the Company's
Class A Common Stock. For the period from March 27, 1995 through December 31,
1995, the years ended December 31, 1996 and 1997, and the three months ended
March 31, 1998, Southwest was the source of 2.7%, 2.3%, 1.4% and 1.4%,
respectively, of the Company's order flow. During the same periods, aggregate
payments by the Company to Southwest for order flow and profit distributions,
respectively, equalled $1.6 million and $451,000, $3.1 million and $1.6
million, $1.8 million and $1.1 million, and $383,000 and $375,000,
respectively. In addition, Southwest is acting as an underwriter in connection
with this Offering. See "Underwriting."

Waterhouse Investor Services, Inc. Upon the closing of this Offering,
Waterhouse Investor Services, Inc. ("Waterhouse") will own 2,136,793 shares of
the Company's Class A Common Stock and 3,945,528 shares of the Company's Class
B Common Stock. Waterhouse is an affiliate of Waterhouse Securities, Inc.
("Waterhouse Securities," together with "Waterhouse," is herein referred to as
the "Waterhouse Entities"). For the period from March 27, 1995 through
December 31, 1995, the years ended December 31, 1996 and 1997, and the three
months ended March 31, 1998, Waterhouse Securities was the source of 5.8%,
6.5%, 10.1% and 11.3%, respectively, of the Company's order flow. During the
same periods, aggregate payments by the Company to the Waterhouse Entities for
order flow and profit distributions, respectively, equalled $2.0 million and
$697,000, $6.8 million and $2.9 million, $10.2 million and $3.9 million and
$3.5 million and $1.5 million, respectively. In addition, Trimark utilizes
National Investor Services Corp. ("NISC"), a subsidiary of

60
<PAGE>

Waterhouse, as its clearing broker. In the year ended December 31, 1997 and
the three months ended March 31, 1998, the Company paid NISC clearing fees in
the amount of $9.5 million and $6.0 million, respectively.

Trimark Leasing. The Company leases certain computer and telephone equipment
and furniture from Trimark Leasing, Inc., an entity which is wholly-owned by
Steven L. Steinman and Robert M. Lazarowitz, executive officers and directors
of the Company. For the period from March 27, 1995 through December 31, 1995,
the years ended December 31, 1996 and 1997, and for the three months ended
March 31, 1998, rental expenses under such leases were $261,000, $530,000,
$539,000, and $118,000, respectively.

PaineWebber. Knight has contracted to clear all its trades through
Correspondent Services Corp. ("CSC"), a subsidiary of PaineWebber Incorporated
("PaineWebber"). In the three months ended March 31, 1998, the Company paid
CSC clearing fees in the amount of $590,000. PaineWebber is acting as an
underwriter in connection with the Offering. In addition, Knight is party to a
$30,000,000 subordinated credit facility with PaineWebber Group, Inc., an
affiliate of PaineWebber. As of March 31, 1998, no amounts were outstanding
under the facility.

61
<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information known to the Company
regarding beneficial ownership of the Company's Common Stock giving effect to
the Reorganization and the exercise of the Brown Option, and as adjusted to
reflect the sale of the shares pursuant to this offering, by (i) each person
who is known by the Company to own beneficially more than 5% of its
outstanding shares of Common Stock, (ii) each director and Named Executive
Officer of the Company, (iii) all directors and executive officers of the
Company as a group and (iv) the Selling Stockholder. Except as otherwise
indicated below, to the knowledge of the Company, each person listed below has
sole voting power and investment power with respect to the shares beneficially
owned by such person subject to community property laws where applicable.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO SHARES OWNED AFTER
THE OFFERING OFFERED BY THE OFFERING(3)
--------------------- THE SELLING -----------------------
NAME AND ADDRESS(1) NUMBER PERCENT(2) STOCKHOLDER NUMBER PERCENT
- ------------------- ---------- ---------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Steven L. Steinman(4)... 4,414,656 10.33% -- 4,414,656 8.58%
Kenneth D. Pasternak.... 4,342,104 10.16 -- 4,342,104 8.44
Walter F. Raquet........ 4,269,709 9.99 -- 4,269,709 8.30
Robert M.
Lazarowitz(5).......... 4,342,104 10.16 -- 4,342,104 8.44
Anthony M. Sanfilippo... 415,705 * -- 415,705 *
Robert I. Turner........ -- 0.00 -- -- 0.00
Michael T. Dorsey....... -- 0.00 -- -- 0.00
Simon D. Spenser........ -- 0.00 -- -- 0.00
Martin Averbuch......... -- 0.00 -- -- 0.00
Charles V. Doherty...... -- 0.00 -- -- 0.00
Gene L. Finn............ -- 0.00 -- -- 0.00
Gary R. Griffith........ -- 0.00 -- -- 0.00
J. Joe Ricketts......... -- 0.00 -- -- 0.00
Bruce R. McMaken........ -- 0.00 -- -- 0.00
Rodger O. Riney......... -- 0.00 -- -- 0.00
V. Eric Roach........... -- 0.00 -- -- 0.00
Charles A. Zabatta...... -- 0.00 -- -- 0.00
Ameritrade Holding
Corp................... 3,953,675 9.25 -- 3,953,675 7.69
E*TRADE Securities,
Inc.................... 2,566,432 6.00 -- 2,566,432 4.99
Gruntal & Co.,
L.L.C.(6).............. 1,311,754 3.07 1,311,754 -- 0.00
Discover Brokerage
Direct................. 2,101,963 4.92 -- 2,101,963 4.09
Waterhouse Investor
Services, Inc.......... 6,082,321 14.23 -- 6,082,321 11.83
All executive officers
and directors as a
group (17 persons)..... 17,784,278 41.61% -- 17,784,278 34.58%
</TABLE>
- --------
* Less than one percent of the outstanding Common Stock.
(1) See "Management--Executive Officers and Directors." Unless otherwise
indicated, the address for each beneficial owner is c/o Knight/Trimark
Group, Inc., Newport Tower, 29th Floor, 525 Washington Boulevard, Jersey
City, New Jersey 07310.
(2) The percentage of total outstanding for each stockholder immediately prior
to the Offering is calculated by dividing (i) the number of shares of
Common Stock deemed to be beneficially owned by such stockholder at such
time by (ii) the sum of the number of shares of Common Stock outstanding
at such time.
(3) Assumes that the Underwriters' over-allotment option to purchase up to an
additional 1,500,000 shares from the Company is not exercised.
(4) Mr. Steinman owns a nominal amount of the Company's Common Stock, and the
remainder of the shares attributed to him are owned by Steinman Family
Associates, L.P., a Delaware limited partnership, in which he is the
general partner and the limited partners are his wife and a trust for the
benefit of certain members of his immediate family.

(5) Mr. Lazarowitz owns a nominal amount of the Company's Common Stock, and
the remainder of the shares attributed to him are owned by Lazarowitz
Family Associates, L.P., a Delaware limited partnership, in which he is
the general partner and the limited partners are his wife and a trust for
the benefit of certain members of his immediate family.
(6) The address of Gruntal & Co., L.L.C. is 14 Wall Street, New York, New York
10005.

62
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The following summary description of the capital stock of the Company does
not purport to be complete and is subject to the provisions of the Certificate
of Incorporation and Bylaws of the Company, which are included as exhibits to
the Registration Statement of which this Prospectus forms a part, and the
provisions of applicable law.

AUTHORIZED AND OUTSTANDING CAPITAL STOCK

Upon consummation of the Offering, the authorized Capital Stock of the
Company will consist of 220,000,000 shares of Common Stock, par value $.01 per
share, and 20,000,000 shares of Preferred Stock, par value $.01 per share (the
"Preferred Stock"). Of the 220,000,000 authorized shares of the Company's
Common Stock, 200,000,000 shares will be designated Class A Common Stock and
20,000,000 shares will be designated as Class B Common Stock. As of March 31,
1998, after giving effect to the Reorganization and the Offering, 47,484,299
shares of Class A Common Stock will be issued and outstanding and 3,945,528
shares of Class B Common Stock will be issued and outstanding.

COMMON STOCK

Voting Rights. Except as otherwise required by law or, as described below,
by the Certificate of Incorporation, the holders of shares of Class A Common
Stock will vote together as a single class. Each share of Class A Common Stock
will entitle the registered holder thereof to one vote. There will be no
cumulative voting and, therefore, holders of a majority of the shares of Class
A Common Stock can elect all of the directors.

The holders of Class A Common Stock will be entitled to elect all members of
the Company's Board of Directors and the holders of Class B Common Stock will
have no voting rights except as otherwise provided by law.

Conversion into Class A Common Stock. Pursuant to the Certificate of
Incorporation, each share of Class B Common Stock will be exchangeable at any
time upon sale or other transfer thereof, subject to certain limitations on
such sale or transfer, for one fully paid and nonassessable share of Class A
Common Stock, subject to adjustment for any stock split. Subject to certain
limitations and upon satisfaction of certain conditions, holders of Class B
Common Stock shall be entitled to convert their shares into the same number of
shares of Class A Common Stock.

Liquidation. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company, after payment in full to creditors
and distribution in full of the preferential amounts, if any, to be
distributed to holders of shares of Preferred Stock, unless otherwise required
by law, holders of shares of Common Stock will be entitled to receive all the
remaining assets of the Company of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of Common Stock
held by them. Pursuant to the Certificate of Incorporation, the holders of
Common Stock will participate in the distribution of such assets as if all
classes and series of Common Stock constituted a single class of stock.

Dividends. Subject to the preferential rights of holders of Preferred Stock,
if any, the holders of shares of Common Stock will be entitled to receive,
when, as and if declared by the Board of Directors, out of the assets of the
Company which are by law available therefor, dividends payable either in cash,
in property or in shares of capital stock. Pursuant to the Certificate of
Incorporation, no dividend will be declared or paid in respect of any class of
Common Stock by the Company unless the holders of all classes of Common Stock
receive the same per share dividend, payable in the same amount and type of
consideration, as if such classes constituted a single class, except that if
any dividend is declared that is payable in shares of Common Stock, or in
subscription or other rights to acquire shares of Common Stock, then such
dividend will be declared and paid at the same rate per share with respect to
each class of Common Stock, the dividend payable on shares of Class A Common
Stock will be payable only in shares of, or in subscription or other rights to
acquire shares of, Class A Common Stock, and the dividend payable on shares of
Class B Common Stock will be payable only in shares of, or in subscription or
other rights to acquire shares of Class B Common Stock.

63
<PAGE>

PREFERRED STOCK

Under the Certificate of Incorporation, the Board of Directors will be
expressly authorized, without further stockholder approval, to provide for the
issuance of all or any shares of Preferred Stock in one or more classes or
series, and to fix for each such class or series such voting powers, full or
limited, or no voting powers, and such distinctive designations, preferences
and relative, participating, optional or other special rights and such
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions adopted by the Board of Directors
providing for the issuance of such class or series and as may be permitted by
the DGCL. The Company has no present plans to issue any shares of Preferred
Stock. See "--Antitakeover Effects of Provisions of the Certificate of
Incorporation and Bylaws and the DGCL."

REGISTRATION RIGHTS

Certain securityholders of the Company (the "Rightsholders") are entitled to
require the Company to register under the Securities Act, up to a total of
shares (the "Registrable Shares") of outstanding Common Stock (including
Registrable Shares being sold by the Selling Stockholder in this
offering) pursuant to the terms of a Registration Rights Agreement (the
"Registration Rights Agreement"). The Registration Rights Agreement provides
that in the event the Company proposes to register any of its securities under
the Securities Act at any time or times, the Rightsholders, subject to certain
exceptions, shall be entitled to include Registrable Shares in such
registration. However, the managing underwriter of any such offering may
exclude for marketing reasons some of such Registrable Shares from such
registration. In addition, certain Rightsholders have additional rights,
subject to certain conditions and limitations, to require the Company to
prepare and file a registration statement under the Securities Act with
respect to their Registrable Shares. The Company is generally required to bear
the expenses of all such registrations, except underwriting discounts and
commissions.

ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND
BYLAWS AND THE DGCL

Certificate of Incorporation and Bylaws. The Certificate of Incorporation
will provide that stockholders are not entitled to call a special meeting of
stockholders, nor to require the Board of Directors to call such a meeting.
The Certificate of Incorporation will provide that stockholders will not be
entitled to act by written consent in lieu of a meeting except where such
consent is unanimous. These provisions of the Certificate of Incorporation,
could discourage potential acquisition proposals and could delay or prevent a
change of control of the Company.

Delaware Takeover Statute. The Company is subject to Section 203 of the DGCL
("Section 203"), which, subject to certain exceptions, prohibits a publicly
held Delaware corporation from engaging in any business combination with any
interested stockholder for a period of three years following the date that
such stockholder became an interested stockholder, unless: (i) prior to such
date, the board of directors of the corporation approved either the business
combination or the transaction that resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction that
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (a) by persons
who are directors and also officers and (b) by employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or (iii) on or subsequent to such date, the business
combination is approved by the board of directors and authorized at an annual
or special meeting of stockholders, and not by written consent, by the
affirmative vote of at least 66 2/3% of the outstanding voting stock that is
not owned by the interested stockholder.

Section 203 defines "business combination" to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii)
any sale, transfer, pledge or other disposition of 10% or more of the assets
of the corporation involving the interested stockholder; (iii) subject to
certain exceptions, any

64
<PAGE>

transaction that results in the issuance or transfer by the corporation of any
stock of the corporation to the interested stockholder; (iv) any transaction
involving the corporation that has the effect of increasing the proportionate
share of the stock of any class or series of the corporation beneficially
owned by the interested stockholder; or (v) the receipt by the interested
stockholder of the benefit of any loans, advances, guarantees, pledges or
other financial benefits provided by or through the corporation. In general,
Section 203 defined an interested stockholder as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.

Other Provisions. The holders of Common Stock are not entitled to preemptive
or subscription rights. In any merger, consolidation or business combination,
the consideration to be received per share by holders of Class A Common Stock
is identical to that to be received by holders of Class B Common Stock. No
class of Common Stock may be subdivided, consolidated, reclassified or
otherwise changed unless the other class of Common Stock concurrently is
subdivided, consolidated, reclassified or otherwise changed in the same
proportion and in the same manner. All outstanding shares are, and the shares
of Class A Common Stock offered hereby will be upon issuance, validly issued,
fully paid and nonassessable.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Company's Common Stock is
ChaseMellon Shareholder Services.

65
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have an aggregate of
51,429,827 shares of Common Stock outstanding (assuming no exercise of the
Underwriters' over-allotment option). Of these shares, the 10,000,000 shares
of Class A Common Stock sold in this Offering will be freely tradable without
restriction or further registration under the Securities Act, except that any
shares purchased by an "affiliate" of the Company, as that term is defined in
Rule 144 ("Rule 144") under the Securities Act (an "Affiliate"), may generally
be sold only in compliance with Rule 144 as described below.

Approximately 41,429,827 of the outstanding shares of Common Stock are
"restricted securities" as that term is defined under Rule 144 (the
"Restricted Shares"). Of these Restricted Shares, shares will be subject
to lock-up agreements as described below. Upon expiration of these agreements
all of the Restricted Shares will be available for sale in the public market,
subject to the provisions of Rule 144 under the Securities Act. Upon
completion of this offering, the holders of 41,429,827 of the Restricted
Shares will be entitled to registration rights. Sales of Restricted Shares in
the public market, or the availability of such shares for sale, could
adversely affect the market price of the Common Stock. See "Description of
Capital Stock--Registration Rights."

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an Affiliate, who has beneficially
owned Restricted Shares for at least one year is entitled to sell, within any
three-month period, a number of such shares that does not exceed the greater
of (i) one percent of the then outstanding shares of Class A Common Stock
(approximately 474,844 shares immediately after this offering) or (ii) the
average weekly trading volume in the Class A Common Stock in the Nasdaq
National Market during the four calendar weeks preceding the date on which
notice of such sale is filed with the Securities and Exchange Commission. Such
sales under Rule 144 are also subject to certain manner of sale provisions and
notice requirements and to the availability of current public information
about the Company. In addition, a person who is not an Affiliate and has not
been an Affiliate for at least three months prior to the sale and who has
beneficially owned Restricted Shares for at least two years may resell such
shares without regard to the requirements described above. The Company is
unable to estimate accurately the number of Restricted Shares that ultimately
will be sold under Rule 144 because the number of shares will depend in part
on the market price for the Common Stock, the personal circumstances of the
sellers and other factors. See "Risk Factors--Shares Eligible for Future Sale"
and "Risk Factors--No Prior Market; Possible Volatility of Stock Price."

After the date of this Prospectus, the Company intends to file a
registration statement under the Securities Act on Form S-8 to register all
shares of Common Stock issuable pursuant to the Company's stock option plans.
Such registration statement is expected to become effective immediately upon
filing. Accordingly, shares issued under the Company's stock plans will be
eligible for sale in the public markets upon vesting and exercise of options
or awards, subject to the Rule 144 volume restrictions applicable to
affiliates and, in certain cases, lock-up agreements.

All executive officers and directors of the Company and substantially all of
the Company's stockholders (including the Selling Stockholder), who upon the
completion of this Offering will hold in the aggregate shares of Common
Stock, have agreed that they will not, without the prior written consent of
BancAmerica Robertson Stephens, directly or indirectly, offer to sell, sell,
contract to sell or otherwise dispose of any shares of Common Stock
beneficially owned by them for a period of 180 days after the date of this
Prospectus, subject to certain exceptions. BancAmerica Robertson Stephens may,
in its sole discretion and at any time, without notice, release all or any
portion of the securities subject to lock-up agreements. See "Underwriting."

66
<PAGE>

The Company is unable to estimate the number of shares that will be sold
under Rule 144, as this will depend upon the market price for the Common Stock
of the Company, the personal circumstances of the sellers and other factors.
Prior to this offering, there has been no public market for the Common Stock,
and there can be no assurance that a significant public market for the Common
Stock will develop or be sustained after the Offering.

Sales of substantial amounts of Common Stock, or the perception that such
sales could occur, could adversely affect prevailing market prices for the
Common Stock and could impair the Company's future ability to obtain capital
through an offering of equity securities.

67
<PAGE>

UNDERWRITING

The Underwriters named below, acting through their representatives,
BancAmerica Robertson Stephens, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, PaineWebber Incorporated, ABN AMRO Incorporated and Southwest
Securities, Inc. (the "Representatives"), have severally agreed with the
Company and the Selling Stockholder, subject to the terms and conditions of
the Underwriting Agreement, to purchase the number of shares of Class A Common
Stock set forth below opposite their respective names. The Underwriters are
committed to purchase and pay for all such shares, if any are purchased.

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
BancAmerica Robertson Stephens...........................
Merrill Lynch, Pierce, Fenner & Smith Incorporated.......
PaineWebber Incorporated.................................
ABN AMRO Incorporated....................................
Southwest Securities, Inc. ..............................
----------
Total.................................................. 10,000,000
==========
</TABLE>

The Representatives have advised the Company and the Selling Stockholder
that the Underwriters propose to offer the shares of Class A Common Stock to
the public at the initial public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $ per share, of which $ may be reallowed to other dealers.
After the completion of the initial public offering, the public offering
price, concession and reallowance to dealers may be reduced by the
Representatives. No such reduction shall change the amount of proceeds to be
received by the Company and the Selling Stockholder as set forth on the cover
page of this Prospectus.

The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to
1,500,000 additional shares of Class A Common Stock from the Company at the
initial public offering price per share set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the
same percentage of such additional shares that the number of shares of Class A
Common Stock to be purchased by it shown in the above table represents as a
percentage of the total number of shares offered hereby. If purchased, such
additional shares will be sold by the Underwriters on the same terms less the
underwriting discount as those on which the shares offered hereby are being
sold.

The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Selling Stockholder and the Company against certain civil
liabilities, including liabilities under the Securities Act and liabilities
arising from breaches of representations and warranties contained in the
Underwriting Agreement.

Pursuant to the terms of lock-up agreements, the holders of 41,429,827
shares of the Company's Common Stock have agreed, for a period of up to 180
days after the date of this Prospectus, that, subject to certain exceptions,
they will not contract to sell or otherwise dispose of any shares of Common
Stock, any options or warrants to purchase shares of Common Stock or any
securities convertible into, or exchangeable for, shares of Common Stock,
owned directly by such holders or with respect to which they have the power of
disposition, without the prior written consent of BancAmerica Robertson
Stephens. BancAmerica Robertson Stephens may, in its sole discretion, and at
any time without notice, release all or any portion of the securities subject
to lock-up agreements. All of the shares of Common Stock subject to lock-up
agreements may be eligible for sale in the public market upon the expiration
of the lock-up agreements, subject to Rule 144.

68
<PAGE>

In addition, the Company and the Selling Stockholder have agreed that until
180 days after the date of this Prospectus, the Company and the Selling
Stockholder will not, without prior written consent of BancAmerica Robertson
Stephens, subject to certain exceptions, offer, sell, contract to sell or
otherwise dispose of any shares of Common Stock, any options or warrants to
purchase any shares of Common Stock or any securities convertible into,
exercisable for or exchangeable for shares of Common Stock other than the
Company's and the Selling Stockholder's sale of shares in this offering, the
issuance of shares of Common Stock upon the exercise of outstanding options
and warrants and the grant of options to purchase shares of Common Stock under
existing employee stock option or stock purchase plans. Furthermore, the
Company has agreed not to file any registration statements on Form S-8 to
register the 7,409,000 shares of Class A Common Stock reserved for issuance
pursuant to its Stock Option Plans until at least 90 days after the date of
this Prospectus. See "Management--Executive Compensation" and "Shares Eligible
for Future Sale."

The Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.

The Company's subsidiary, Knight, is a party to a clearing contract with an
affiliate of PaineWebber Incorporated, whereby such affiliate clears all of
Knight's trades for usual and customary fees. One of the Underwriters,
Southwest Securities, Inc., is a stockholder of the Company. See "Certain
Transactions."

Prior to this offering, there has been no public market for the Class A
Common Stock of the Company. Consequently, the initial public offering price
for the Class A Common Stock offered hereby will be determined through
negotiations between the Company and the Representatives. Among the factors to
be considered in such negotiations are prevailing market conditions, certain
financial information of the Company, market valuations of other companies
that the Company and the Representatives believe to be comparable to the
Company, estimates of the business potential of the Company, the present state
of the Company's development and other factors deemed relevant.

The Representatives have advised the Company that, pursuant to Regulation M
under the Securities Act, certain persons participating in the offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions, or the imposition of penalty bids which may have the effect of
stabilizing or maintaining the market price of the Class A Common Stock at a
level above that which might otherwise prevail in the open market. A
"stabilizing bid" is a bid for or the purchase of the Class A Common Stock on
behalf of the Underwriters for the purpose of fixing or maintaining the price
of the Class A Common Stock. A "syndicate covering transaction" is the bid for
or the purchase of the Class A Common Stock on behalf of the Underwriters to
reduce a short position incurred by the Underwriters in connection with the
offering. A "penalty bid" is an arrangement permitting the Representatives to
reclaim the selling concession otherwise accruing to an Underwriter or
syndicate member in connection with this offering if the shares of Class A
Common Stock originally sold by such Underwriter or syndicate member are
purchased by the Representatives in a syndicate covering transaction and has
therefore not been effectively placed by such Underwriter or syndicate member.
The Representatives have advised the Company that such transactions may be
effected in NASDAQ as a National Market issue or otherwise and, if commenced,
may be discontinued at any time.

69
<PAGE>

LEGAL MATTERS

The validity of the Class A Common Stock offered hereby will be passed upon
for the Company by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New
York. Certain legal matters will be passed on for the Underwriters by Brobeck,
Phleger & Harrison LLP, New York, New York.

EXPERTS

The consolidated financial statements as of and for the years ended December
31, 1996 and 1997 and for the period from March 27, 1995 to December 31, 1995
included in this Prospectus have been so included in reliance on the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.

ADDITIONAL INFORMATION

The Company has not previously been subject to the reporting requirements of
the Exchange Act. Upon completion of the Offerings, the Company will be
subject to the informational requirements of the Exchange Act, and in
accordance therewith, will be required to file periodic reports and other
information with the SEC. Such information can be inspected without charge
after the Offerings at the public reference facilities of the SEC at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the regional offices of the SEC located at Suite 1400, Northwest, Atrium
Center, 500 West Madison Street, Chicago, Illinois 60661 and Seven World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material may also
be obtained at prescribed rates from the Public Reference Section of the SEC,
450 Fifth Street, N.W., Washington, D.C. 20549. The SEC also maintains a web
site (http://www.sec.gov) that will contain all information filed
electronically by the Company with the SEC. The Company's Class A Common Stock
will be quoted on NASDAQ and material filed by the Company will be available
for inspection at the offices of the National Association of Securities
Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.

This Prospectus, which constitutes a part of a Registration Statement on
Form S-1 (the "Registration Statement") filed by the Company with the SEC
under the Securities Act, does not contain all of the information set forth in
the Registration Statement, including the exhibits thereto. For further
information with respect to the Company and the Class A Common Stock offered
hereby, reference is made to the Registration Statement and the exhibits
thereto. Statements contained in this Prospectus as to the contents of any
contract or other document are not necessarily complete, and, with respect to
each such contract or document filed as an exhibit to the Registration
Statement, reference is made to the copy of such contract or document, and
each such statement is qualified in all respects by such reference. A copy of
the Registration Statement, including the exhibits thereto, may be inspected
and copies thereof may be obtained as described in the preceding paragraph
with respect to periodic reports and other information to be filed by the
Company under the Exchange Act.

70
<PAGE>

ROUNDTABLE PARTNERS, L.L.C.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Independent Accountants.......................................... F-2
Consolidated Statements of Financial Condition as of December 31, 1996 and
1997 and (unaudited) March 31, 1998 and (unaudited) Pro forma March 31,
1998...................................................................... F-3
Consolidated Statements of Income for the period from March 27, 1995 (date
of initial capitalization) through December 31, 1995, the years ended
December 31, 1996 and 1997 and the (unaudited) three month periods ended
March 31, 1997 and 1998................................................... F-4
Consolidated Statements of Changes in Members' Equity for the period from
March 27, 1995 (date of initial capitalization) through December 31, 1995,
the years ended December 31, 1996 and 1997 and the (unaudited) three month
period ended March 31, 1998............................................... F-5
Consolidated Statements of Cash Flows for the period from March 27, 1995
(date of initial capitalization) through December 31, 1995, the years
ended December 31, 1996 and 1997 and the (unaudited) three month periods
ended March 31, 1997 and 1998............................................. F-6
Notes to Consolidated Financial Statements................................. F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Advisory Board and
Members of Roundtable Partners, L.L.C.

In our opinion, the accompanying consolidated statements of financial
condition and the related consolidated statements of income, changes in
members' equity and cash flows present fairly, in all material respects, the
consolidated financial position of Roundtable Partners, L.L.C. and its
subsidiaries at December 31, 1996 and 1997, and the results of their
operations and their cash flows for the period from March 27, 1995 (date of
initial capitalization) through December 31, 1995 and for the years ended
December 31, 1996 and 1997, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.

Price Waterhouse LLP

New York, New York
February 10, 1998, except as to Note 15,
which is as of April 15, 1998

F-2
<PAGE>

ROUNDTABLE PARTNERS, L.L.C.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
------------------------- MARCH 31, MARCH 31,
1996 1997 1998 1998
------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
(NOTE 16)
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents............ $ 15,353,166 $ 13,797,198 $ 5,429,440 $ 5,500,870
Securities owned, at
market value........... 46,780,638 61,726,045 63,490,053 63,490,053
Receivable from clearing
brokers................ 23,155,776 30,151,720 78,119,153 78,119,153
Fixed assets and
leasehold improvements,
at cost, less
accumulated
depreciation and
amortization of
$1,752,435 in 1996,
$3,884,743 in 1997 and
$4,650,032 in 1998
(unaudited)............ 6,398,112 7,353,429 8,273,607 8,273,607
Goodwill, less
accumulated
amortization of
$2,720,728 in 1996,
$4,465,484 in 1997 and
$4,973,786 in 1998
(unaudited)............ 13,852,211 14,192,840 14,394,624 14,394,624
Other assets............ 495,564 651,190 1,366,150 1,366,150
------------ ------------ ------------ ------------
Total assets........ $106,035,467 $127,872,422 $171,073,027 $171,144,457
============ ============ ============ ============
LIABILITIES AND MEMBERS' (PRO FORMA
STOCKHOLDERS') EQUITY
Liabilities
Securities sold, not
yet purchased, at
market value......... $ 19,021,401 $ 21,060,857 $ 54,581,144 $ 54,581,144
Mandatorily Redeemable
Preferred Units
currently
redeemable........... -- -- -- 13,636,510
Distributions on
Common Units payable
to members........... 4,983,972 8,405,326 8,767,185 35,288,478
Accrued compensation
expense.............. 4,185,918 6,112,562 7,940,980 7,940,980
Accrued execution and
clearance fees....... 3,174,472 3,966,145 3,789,466 3,789,466
Accrued payments for
order flow........... 2,898,601 3,764,391 5,278,397 5,278,397
Liability for capital
lease................ 1,070,029 786,801 713,207 713,207
Accounts payable,
accrued expenses and
other liabilities.... 1,911,988 1,394,288 1,612,570 1,612,570
Interest payable on
Preferred Units...... 596,878 424,981 416,486 416,486
Subordinated note..... 500,000 500,000 500,000 500,000
Mandatorily Redeemable
Preferred A Units.... 22,705,690 12,483,610 12,483,610 --
Mandatorily Redeemable
Preferred B Units.... 15,000,000 15,000,000 15,000,000 13,847,100
------------ ------------ ------------ ------------
Total liabilities... 76,048,949 73,898,961 111,083,045 137,604,338
------------ ------------ ------------ ------------
Commitments and contin-
gent liabilities (Notes
9 and 12)
Members' equity
Common units, $10 par
value, 750,000 units
authorized; 738,097,
734,497 and 734,497
(unaudited) units
issued and
outstanding at
December 31, 1996,
1997 and March 31,
1998, respectively... 7,380,970 7,344,970 7,344,970 --
Undistributed income.. 22,605,548 46,628,491 52,645,012 --
Pro forma stockholders'
equity (unaudited)
Class A Common Stock,
$0.01 par value,
200,000,000 shares
authorized;
38,796,053
shares issued and
outstanding.......... -- -- -- 387,961
Class B Common Stock,
$0.01 par value,
20,000,000 shares
authorized; 3,945,528
shares issued and
outstanding.......... -- -- -- 39,455
Additional paid-in
capital.............. -- -- -- 33,112,703
------------ ------------ ------------ ------------
Total members' (pro
forma
stockholders')
equity............. 29,986,518 53,973,461 59,989,982 33,540,119
------------ ------------ ------------ ------------
Total liabilities
and members' (pro
forma
stockholders')
equity............ $106,035,467 $127,872,422 $171,073,027 $171,144,457
============ ============ ============ ============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-3
<PAGE>

ROUNDTABLE PARTNERS, L.L.C.

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
FOR THE PERIOD FROM
MARCH 27, 1995 FOR THE THREE MONTHS
(DATE OF INITIAL FOR THE YEARS ENDED ENDED
CAPITALIZATION) DECEMBER 31, MARCH 31,
THROUGH ------------------------- -----------------------
DECEMBER 31, 1995 1996 1997 1997 1998
------------------- ------------ ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Net trading revenue..... $69,516,222 $183,893,654 $224,627,402 $50,482,673 $63,006,565
Interest, net........... 296,019 1,282,522 2,039,244 495,551 525,651
----------- ------------ ------------ ----------- -----------
Total revenues...... 69,812,241 185,176,176 226,666,646 50,978,224 63,532,216
----------- ------------ ------------ ----------- -----------
EXPENSES
Payments for order flow
Affiliates ........... 14,388,467 46,374,341 50,662,461 14,300,570 11,313,265
Non-affiliates........ 11,605,572 23,454,327 16,249,579 3,827,950 4,943,253
Execution and clearance
fees...................
Affiliates............ 11,724,385 21,461,560 24,262,767 4,923,875 7,579,469
Non-affiliates........ 985,373 4,375,397 7,805,806 1,487,104 2,661,208
Employee compensation
and benefits........... 12,150,932 39,494,032 57,716,994 12,013,016 16,168,160
Communications and data
processing............. 2,202,276 4,359,785 6,809,086 1,318,959 2,169,675
Depreciation and
amortization........... 1,626,159 2,975,152 4,225,286 936,362 1,291,164
Interest on Preferred
Units.................. 1,309,576 2,092,593 1,940,972 603,955 416,486
Occupancy and equipment
rentals................ 849,352 1,776,806 2,657,402 536,627 1,081,542
Business development.... 130,422 623,492 1,459,822 244,421 376,850
Other................... 1,498,614 1,428,089 2,799,238 365,315 747,438
----------- ------------ ------------ ----------- -----------
Total expenses...... 58,471,128 148,415,574 176,589,413 40,558,154 48,748,510
----------- ------------ ------------ ----------- -----------
NET INCOME.............. $11,341,113 $ 36,760,602 $ 50,077,233 $10,420,070 $14,783,706
=========== ============ ============ =========== ===========
Earnings per common unit
Basic................. $ 33.21 $ 62.31 $ 67.93 $ 14.12 $ 20.13
=========== ============ ============ =========== ===========
Diluted............... $ 9.36 $ 23.08 $ 41.54 $ 6.45 $ 20.13
=========== ============ ============ =========== ===========
Weighted average common
units outstanding
Basic................. 341,508 589,948 737,197 738,097 734,497
=========== ============ ============ =========== ===========
Diluted............... 1,351,298 1,683,537 1,252,183 1,710,044 734,497
=========== ============ ============ =========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-4
<PAGE>

ROUNDTABLE PARTNERS, L.L.C.

CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY

FOR THE PERIOD FROM MARCH 27, 1995 (DATE OF INITIAL CAPITALIZATION) THROUGH
DECEMBER 31, 1995, THE YEARS ENDED DECEMBER 31, 1996 AND 1997 AND THE
(UNAUDITED)
THREE MONTH PERIOD ENDED MARCH 31, 1998

<TABLE>
<CAPTION>
COMMON UNITS
------------------- UNDISTRIBUTED
UNITS AMOUNT INCOME TOTAL
------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Initial capitalization, March
27, 1995..................... 304,407 $3,044,070 $ -- $ 3,044,070
Issuance of Common Units...... 68,241 682,410 -- 682,410
Net income.................... -- -- 11,341,113 11,341,113
Distributions on Common
Units........................ -- -- (2,868,323) (2,868,323)
------- ---------- ----------- -----------
Balance, December 31, 1995.... 372,648 3,726,480 8,472,790 12,199,270
Issuance of Common Units...... 365,449 3,654,490 -- 3,654,490
Net income.................... -- -- 36,760,602 36,760,602
Distributions on Common
Units........................ -- -- (22,627,844) (22,627,844)
------- ---------- ----------- -----------
Balance, December 31, 1996.... 738,097 7,380,970 22,605,548 29,986,518
Net income.................... -- -- 50,077,233 50,077,233
Distributions on Common
Units........................ -- -- (25,742,857) (25,742,857)
Resignation of Member......... (3,600) (36,000) (311,433) (347,433)
------- ---------- ----------- -----------
Balance, December 31, 1997.... 734,497 7,344,970 46,628,491 53,973,461
Net income (unaudited)........ -- -- 14,783,706 14,783,706
Distributions on Common Units
(unaudited).................. -- -- (8,767,185) (8,767,185)
------- ---------- ----------- -----------
Balance, March 31, 1998
(unaudited).................. 734,497 $7,344,970 $52,645,012 $59,989,982
======= ========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-5
<PAGE>

ROUNDTABLE PARTNERS, L.L.C.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
MARCH 27, 1995
(DATE
OF INITIAL FOR THE THREE MONTHS
CAPITALIZATION) FOR THE YEARS ENDED ENDED
THROUGH DECEMBER 31, MARCH 31,
DECEMBER 31, ------------------------ ------------------------
1995 1996 1997 1997 1998
--------------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income.............. $11,341,113 $36,760,602 $50,077,233 $10,420,070 $14,783,706
Adjustments to reconcile
net income to net cash
(used in) provided by
operating activities
Depreciation and
amortization........... 1,626,159 2,975,152 4,225,286 936,362 1,291,164
(Increase) decrease in
operating assets
Securities owned....... (33,763,047) (13,017,591) (14,945,407) 7,343,493 (1,764,008)
Receivable from
clearing brokers...... (11,436,653) (11,719,123) (6,995,944) (6,320,762) (47,967,433)
Other assets........... (508,552) (115,061) (225,200) (130,803) (732,532)
Increase (decrease) in
operating liabilities
Securities sold, not
yet purchased......... 11,000,921 8,020,480 2,039,456 (1,474,487) 33,520,287
Accrued compensation
expense............... 1,458,880 2,727,038 1,926,644 391,216 1,828,418
Accrued execution and
clearance fees........ 2,395,353 779,119 791,673 (252,109) (176,679)
Accrued payments for
order flow............ 1,611,636 1,286,965 865,790 (1,334,507) 1,514,006
Accounts payable,
accrued expenses and
other liabilities..... 1,329,886 582,102 (517,700) (1,267,698) 218,282
Interest payable on
Preferred Units....... 433,440 163,438 (171,897) 7,074 (8,494)
----------- ----------- ----------- ----------- -----------
Net cash (used in)
provided by operating
activities............ (14,510,864) 28,443,121 37,069,934 8,317,849 2,506,717
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of general
partnership interest in
Trimark Securities,
L.P.................... (15,273,295) -- -- -- --
Purchase of business and
net assets of
Tradetech Securities,
L.P.................... -- -- (750,000) -- --
Payment of contingent
consideration.......... (1,261,298) (1,351,447) (1,685,385) (218,988) (710,086)
Sale of fixed assets.... -- -- 1,413,115 -- --
Purchases of fixed
assets and leasehold
improvements........... (1,410,283) (3,939,871) (4,429,389) (1,230,863) (1,685,469)
----------- ----------- ----------- ----------- -----------
Net cash used in
investing activities.. (17,944,876) (5,291,318) (5,451,659) (1,449,851) (2,395,555)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from issuance
of subordinated notes.. 5,000,000 500,000 -- -- --
Proceeds from issuance
of Mandatorily
Redeemable Preferred A
Units.................. 13,415,300 8,870,410 -- -- --
Proceeds from issuance
of Mandatorily
Redeemable Preferred B
Units.................. 15,000,000 -- -- -- --
Proceeds from issuance
of Common Units........ 3,726,480 2,940,200 -- -- --
Decrease in liability
for capital lease...... (149,700) (267,664) (283,228) (69,404) (73,594)
Redemptions of
Mandatorily Redeemable
Preferred A Units...... -- (3,865,730) (10,147,050) -- --
Resignation of Member... -- -- (422,463) -- --
Distributions on Common
Units.................. (2,868,323) (17,643,870) (22,321,502) (4,983,972) (8,405,326)
----------- ----------- ----------- ----------- -----------
Net cash provided by
(used in) financing
activities............ 34,123,757 (9,466,654) (33,174,243) (5,053,376) (8,478,920)
----------- ----------- ----------- ----------- -----------
Increase (decrease) in
cash and cash
equivalents............ 1,668,017 13,685,149 (1,555,968) 1,814,622 (8,367,758)
Cash and cash
equivalents at
beginning of period.... -- 1,668,017 15,353,166 15,353,166 13,797,198
----------- ----------- ----------- ----------- -----------
Cash and cash
equivalents at end of
period................. $ 1,668,017 $15,353,166 $13,797,198 $17,167,788 $ 5,429,440
=========== =========== =========== =========== ===========
Supplemental disclosure
of cash flow
information
Cash paid for
interest.............. $ 1,150,262 $ 2,470,434 $ 2,652,357 $ 726,773 $ 644,302
=========== =========== =========== =========== ===========
</TABLE>
Supplemental information pertaining to noncash investing and financing
activities

In 1995, the Company incurred a capital lease obligation of $1,487,393, which
represents the present value of future minimum lease payments on certain fixed
assets.

Effective January 1, 1996, Waterhouse Securities exchanged its $5,000,000
subordinated note for 71,429 Common Units and 428,571 Preferred A Units issued
by the Company with an aggregate value of $5,000,000.

The accompanying notes are an integral part of these consolidated financial
statements.

F-6
<PAGE>

ROUNDTABLE PARTNERS, L.L.C.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AT MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)

1. ORGANIZATION AND DESCRIPTION OF THE BUSINESS

Roundtable Partners, L.L.C. ("Roundtable"), a Delaware limited liability
corporation, was initially capitalized on March 27, 1995 to own and operate
the securities market-making businesses of Knight Securities, L.P. ("Knight")
and Trimark Securities, L.P. ("Trimark") (collectively, the "Company"). The
Company is owned 20% by key employees of Knight, 20% by key employees of
Trimark (collectively, the "Management Investors") and 60% by a consortium of
independent securities firms and investors (the "Non-Management Investors").
As a limited liability company, the Company has a finite life and must be
dissolved no later than September 30, 2024.

The Company, which operates in one segment and line of business - equity
securities market-making, owns a 99.99% general partnership interest in both
Knight and Trimark. A subchapter S holding corporation owned by the Management
Investors owns a 0.01% limited partnership interest in each entity. Knight, a
New York limited partnership, was organized on February 17, 1995 by Roundtable
to operate as a market maker in over-the-counter equity securities ("OTC
stocks"), principally securities traded on the National Association of
Securities Dealers, Inc.'s ("NASD") Automated Quotation System ("NASDAQ"),
including Small Capitalization listings and securities listed on the OTC
Bulletin Board. Trimark is a New York Limited Partnership which was acquired
by the Company on March 27, 1995 (Note 2). Trimark operates as a market maker
in equity securities listed on the New York and American Stock Exchanges
("listed stocks"). Knight and Trimark are registered as broker-dealers with
the Securities and Exchange Commission and are members of the NASD.

2. ACQUISITIONS

On March 27, 1995, Trimark Securities, Inc., an unaffiliated securities
firm, contributed its market-making business in listed stocks and the fixed
assets necessary to operate such business to Trimark Securities L.P. for a
99.99% general partnership interest. Immediately thereafter, Trimark
Securities, Inc. sold its 99.99% general partnership interest in Trimark
Securities, L.P. to the Company in exchange for 1.5 million Preferred B Units
of the Company with a fair value of $15 million and contingent consideration.
In connection with that transaction, the Company incurred $348,000 in
acquisition costs. The Company's acquisition of the 99.99% general partnership
interest in Trimark Securities L.P. was recorded under the purchase method and
the carrying values of the assets and liabilities acquired were adjusted to
their fair market values as of the acquisition date. The excess of the
purchase price over the fair value of the net assets acquired of $13,960,195
was recorded as goodwill and is being amortized over a period of ten years.

In connection with the acquisition, the Company entered into an agreement
which entitles Trimark Securities, Inc. to receive additional consideration
during the five years immediately subsequent to the acquisition, equal to 10%
of Trimark's pre-tax earnings, before amortization of goodwill and
depreciation on fixed assets initially purchased. The additional consideration
represents contingent consideration to be paid in connection with the Trimark
acquisition. All amounts paid under this arrangement are being capitalized as
additional purchase price (goodwill) and amortized over the remainder of the
original ten year amortization period.

Pursuant to an agreement effective November 17, 1997, Trimark purchased the
business and the related fixed assets of Tradetech Securities, L.P.
("Tradetech"), an Illinois Limited Partnership, in exchange for $750,000 in
cash and contingent consideration. Tradetech was a direct competitor of
Trimark operating as a market maker in listed stocks and, after the
acquisition, its business and operations were integrated into Trimark's. The
acquisition was accounted for under the purchase method and the carrying
values of the assets acquired were adjusted to their fair market values as of
the acquisition date. The excess of the purchase price over the fair value of
the assets acquired of $400,000 was recorded as goodwill and is being
amortized over a period of five years.

F-7
<PAGE>

ROUNDTABLE PARTNERS, L.L.C.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)

In connection with the acquisition, Trimark entered into an agreement with
Tradetech which entitles Tradetech to additional consideration equal to 10% of
Trimark's pretax earnings during the period from the acquisition date through
December 31, 2000 (the "Earnout Period"). If, after the Earnout Period, the
owners of Tradetech have not received payments which total $3,000,000, the
additional consideration shall continue until the earlier of (i) December 31,
2002, or (ii) an aggregate of $3,000,000 has been paid. All amounts paid under
this arrangement will be capitalized as additional purchase price (goodwill)
and amortized over the remainder of the original five year amortization
period.

The total contingent consideration paid and recorded as goodwill by the
Company was as follows:

<TABLE>
<CAPTION>
TRIMARK TRADETECH
ADDITIONAL ADDITIONAL
CONSIDERATION CONSIDERATION TOTAL
------------- ------------- ----------
<S> <C> <C> <C>
For the period March 27, 1995
through December 31, 1995......... $1,261,297 $ -- $1,261,297
For the year ended December 31,
1996.............................. 1,351,447 -- 1,351,447
For the year ended December 31,
1997.............................. 1,466,812 218,573 1,685,385
For the three months ending March
31, 1998 (unaudited).............. 382,879 327,207 710,086
---------- -------- ----------
$4,462,435 $545,780 $5,008,215
========== ======== ==========
</TABLE>

3. SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidation and form of presentation

The accompanying consolidated financial statements include the accounts of
Roundtable, Knight and Trimark. All significant intercompany transactions and
balances have been eliminated.

Cash equivalents

Cash equivalents represent money market accounts, which are payable on
demand. The carrying amount of such cash equivalents approximates fair value
due to the short-term nature of these instruments.

Trading activities

Securities owned and securities sold, not yet purchased, which primarily
consist of listed and OTC stocks, are carried at market value and are recorded
on a trade date basis. Net trading revenue (trading gains, net of trading
losses) and related expenses, including compensation and benefits, execution
and clearance fees and payments for order flow, are also recorded on a trade
date basis. Payments for order flow represent payments to other broker-dealers
for directing their order executions to Knight and Trimark.

Mandatorily redeemable preferred units

The Company's Preferred A and Preferred B Units are mandatorily redeemable,
and have been classified as liabilities in the Consolidated Statements of
Financial Condition, and the related distributions on such units have been
classified as interest expense in the Consolidated Statements of Income.

F-8
<PAGE>

ROUNDTABLE PARTNERS, L.L.C.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)

Depreciation, amortization and occupancy

Fixed assets are being depreciated on a straight-line basis over their
estimated useful lives of three to seven years. Leasehold improvements are
being amortized on a straight-line basis over the life of the related office
lease. The Company records rent expense on a straight-line basis over the life
of the lease.

Income taxes

As a limited liability company, the Company is treated as a partnership and,
as such, is not subject to federal, state or local income taxes.

Estimated fair value of financial instruments

Statement of Financial Accounting Standards No. 107, "Disclosure about Fair
Value of Financial Instruments," requires the disclosure of the fair value of
financial instruments, including assets and liabilities recognized on the
Consolidated Statements of Financial Condition. The Company's securities owned
and securities sold, not yet purchased are carried at market value. Management
estimates that the fair values of other financial instruments recognized on
the Consolidated Statements of Financial Condition (including receivables,
payables, accrued expenses, subordinated debt and mandatorily redeemable
preferred units) approximates their carrying value, as such financial
instruments are short-term in nature, bear interest at current market rates or
are subject to frequent repricing.

Other

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Unaudited interim information

The interim financial statements and related financial information as of
March 31, 1998 and for the three months ended March 31, 1998 and March 31,
1997 are unaudited; however, in the opinion of the Company, the interim
information includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of operations
for the interim periods. The results of operations for the three months ended
March 31, 1998 are not necessarily indicative of the results to be expected
for the full year.

4. FIXED ASSETS AND LEASEHOLD IMPROVEMENTS

Fixed assets and leasehold improvements comprise the following:

<TABLE>
<CAPTION>
DECEMBER 31,
DEPRECIATION --------------------- MARCH 31,
PERIOD 1996 1997 1998
------------- ---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Computer hardware and
software................... 3 years $3,137,877 $5,307,119 $6,471,200
Trading systems............. 5 years 2,660,387 2,648,326 2,812,726
Leasehold improvements...... Life of Lease 1,359,458 1,666,288 1,709,613
Furniture and fixtures...... 7 years 461,463 735,341 970,562
Telephone system............ 5 years 473,167 537,585 580,226
Equipment................... 5 years 58,195 343,513 379,312
---------- ---------- ----------
8,150,547 11,238,172 12,923,639
Less--Accumulated depreciation and
amortization............................. 1,752,435 3,884,743 4,650,032
---------- ---------- ----------
$6,398,112 $7,353,429 $8,273,607
========== ========== ==========
</TABLE>

F-9
<PAGE>

ROUNDTABLE PARTNERS, L.L.C.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)

Knight leases its trading system under a noncancelable capital lease. As of
December 31, 1995, 1996, 1997 and March 31, 1998 (unaudited), the net book
value of the trading equipment recorded under such capital lease was
$1,338,654, $1,041,175, $743,697 and $669,327 (unaudited), respectively.
Depreciation of the capitalized asset is included in depreciation and
amortization expense in the Consolidated Statements of Income. As of December
31, 1997, future minimum lease payments under the capital lease and the
determination of the related liability for the capital lease were as follows:

<TABLE>
<S> <C>
Year ending December 31, 1998...................................... $340,800
Year ending December 31, 1999...................................... 340,800
Year ending December 31, 2000...................................... 170,400
--------
Total future minimum lease commitments........................... 852,000
Amount representing interest..................................... (65,199)
--------
Present value of minimum lease payments.......................... $786,801
========
</TABLE>

As of March 31, 1998 (unaudited), future minimum lease payments under the
capital lease and the determination of the related liability for the capital
lease were as follows:

<TABLE>
<S> <C>
For the period from April 1, 1998 through December 31, 1998........ $255,600
Year ending December 31, 1999...................................... 340,800
Year ending December 31, 2000...................................... 170,400
--------
Total future minimum lease commitments........................... 766,800
Amount representing interest..................................... (53,593)
--------
Present value of minimum lease payments.......................... $713,207
========
</TABLE>

5. SUBORDINATED NOTES

On March 24, 1995, the Company entered into a $5,000,000 subordinated note
agreement with Waterhouse Securities, Inc. ("Waterhouse"), a major customer,
which paid interest quarterly at a market rate based on the broker call rate
and matured on March 23, 1997. The subordinated note was senior in liquidation
to the Common Units and Mandatorily Redeemable Preferred A and B Units, but
was subordinate to the claims of all other creditors. Concurrent with the
execution of the subordinated note, the Company granted Waterhouse certain
benefits accorded to holders of Common Units, including the right to receive
additional payments based on the amount of order flow provided by Waterhouse.
Effective January 1, 1996, Waterhouse entered into an agreement with the
Company to exchange the subordinated note for 71,429 Common Units and 428,571
Preferred A Units issued by the Company with an aggregate value of $5,000,000.
As a result of the exchange, the subordinated note was satisfied in full and
canceled. The Common Units owned by Waterhouse are non-voting. In connection
with the issuance of Common Units to Waterhouse, the Management Investors
purchased, in aggregate, 47,620 additional Common Units at a price of $10 per
unit, such that, after the aforementioned transactions, the Management
Investors and the Non-Management Investors owned 40% and 60%, respectively, of
the total outstanding Common Units.

On April 24, 1996, the Company entered into a $500,000 subordinated note
agreement with Brown & Co. Securities Corporation ("Brown"), a major customer,
which pays interest quarterly at a market rate approximating the prevailing
Federal Funds Rate. The subordinated note matures on April 23, 1999, but may
be prepaid by the Company at any time, without penalty. The subordinated note
is senior in liquidation to the Common Units and Mandatorily Redeemable
Preferred A and B Units, but is subordinate to the claims of all other
creditors. Concurrent with the execution of the subordinated note, the Company
granted Brown certain benefits accorded to holders of Common Units, including
the right to receive additional payments based on

F-10
<PAGE>

ROUNDTABLE PARTNERS, L.L.C.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)

the amount of order flow provided by Brown. Additionally, the Company granted
Brown the option to purchase 7,143 Common Units at the then prevailing market
price of $10 per Common Unit during the term that the subordinated note
remains outstanding (the "Brown Option"). As of April 24, 1996, the date of
grant, the Brown Option had a de minimis value.

During 1995, the Company made additional payments for order flow totaling
$996,786 to Waterhouse. Similarly, the Company made additional payments for
order flow to Brown totaling $1,088,924, $1,865,222 and $520,360 (unaudited)
during the years ended December 31, 1996 and 1997 and during the three month
period ended March 31, 1998 (unaudited). Such amounts have been included in
payments for order flow expense in the accompanying Consolidated Statements of
Income.

6. MEMBERS' EQUITY

The Company's Common Units, which have one for one voting rights (except for
the units owned by Waterhouse (Note 5)), are owned 40% by Management Investors
and 60% by Non-Management Investors. The Company's net income (after
distributions to holders of Preferred A and B Units) is allocated to holders
of Common Units based upon a formula which considers the volume of order flow
such holders have provided to Knight and Trimark during each period and each
holder's proportionate share of total Common Units. Net losses are shared
ratably in proportion to each member's ownership percentage. On December 31,
1997, the Company declared a distribution to holders of Common Units of
$8,405,326, which was paid on January 23, 1998. On March 31, 1998, the Company
declared a distribution to holders of Common Units of $8,767,185 (unaudited),
payable on April 20, 1998 (unaudited).

The Common Units are generally not transferable, although a member may
resign from the Company at any time by providing written notice to the
Company. The Company shall pay the resigning member $10 for each Common Unit
and Preferred A Unit owned by the resigning member, and any remaining
undistributed income in the resigning member's capital account as of the date
of the written notice (the "Resigning Member Capital Distribution"). During
1997, one member resigned from the Company and received a Resigning Member
Capital Distribution of $422,463, or $10 per unit. There were no resignations
in 1995, 1996 or the three month period ended March 31, 1998 (unaudited).

7. MANDATORILY REDEEMABLE PREFERRED UNITS

The Mandatorily Redeemable Preferred A Units ("Preferred A Units"), which
are owned by the Non-Management Investors, are non-voting and have preference
to all other units in the event of liquidation. The Preferred A Units were
originally issued to the Non-Management Investors for a price of $10 per unit,
simultaneously with the purchase of Common Units, at a ratio of six Preferred
A Units to one Common Unit. The Preferred A Units pay quarterly distributions
at a rate approximating the Federal Funds rate and are subject to mandatory
redemption annually, on April 15th, at a fixed price of $10 per unit, in an
aggregate amount equal to at least 25 percent of the Company's consolidated
net income on an annual basis. Any units not redeemed by the fifth anniversary
of the issuance date are convertible into Common Units on a one-for-one basis,
at the holder's option. There were 2,700,000 Preferred A Units authorized as
of December 31, 1995, 1996 and 1997 and March 31, 1998 (unaudited).
Distributions to holders of Preferred A Units for the period ending December
31, 1995 amounted to $590,903, which included distributions accrued, but not
paid, of $202,891 at December 31, 1995. Distributions to holders of Preferred
A Units for the year ending December 31, 1996 amounted to $1,155,859, which
included distributions accrued, but not paid, of $359,429 at December 31,
1996. Distributions to holders of Preferred A Units for the year ended
December 31, 1997 amounted to $985,737, which included distributions accrued,
but not paid, of $193,035 at December 31, 1997.

F-11
<PAGE>

ROUNDTABLE PARTNERS, L.L.C.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)

The Mandatorily Redeemable Preferred B Units ("Preferred B Units"), which
are held by Trimark Securities, Inc., are non-voting and have preference only
to the Common Units in liquidation. The Preferred B Units pay quarterly
distributions at a rate approximating the Federal Funds rate and, after the
redemption of all Preferred A Units, are subject to mandatory redemption
annually, on April 15th, at a fixed price of $10 per unit, in an aggregate
amount equal to at least 25 percent of the Company's consolidated net income
on an annual basis, if certain levels of earnings are achieved in the prior
year. The Preferred B Units are not convertible into Common Units. There were
1,500,000 Preferred B Units authorized as of December 31, 1995, 1996 and 1997
and March 31, 1998 (unaudited). Distributions to holders of Preferred B Units
for the period ending December 31, 1995 amounted to $718,673, which includes
distributions accrued, but not paid, of $230,549 at December 31, 1995.
Distributions to holders of Preferred B Units for the year ending December 31,
1996 amounted to $936,734, which includes distributions accrued, but not paid,
of $237,449 at December 31, 1996. Distributions to holders of Preferred B
Units for the year ended December 31, 1997 amounted to $955,235, which
includes distributions accrued, but not paid, of $231,946 at December 31,
1997. No Preferred B Units were redeemed during the period from March 27, 1995
through December 31, 1995 or the years ending December 31, 1996 or 1997 or the
three months ended March 31, 1998 (unaudited). The following table presents
activity for Preferred A Units and Preferred B Units for the period from March
27, 1995 through December 31, 1995, for the years ended December 31, 1996 and
1997, and for the three months ended March 31, 1998 (unaudited):

<TABLE>
<CAPTION>
PREFERRED A UNITS PREFERRED B UNITS
------------------------ ---------------------
UNITS AMOUNT UNITS AMOUNT
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Initial capitalization,
March 27, 1995........... 1,095,864 $ 10,958,640 1,500,000 $15,000,000
Issuance of Preferred A
Units.................... 245,666 2,456,660 -- --
---------- ------------ --------- -----------
Balance, December 31,
1995..................... 1,341,530 13,415,300 1,500,000 15,000,000
Issuance of Preferred A
Units.................... 1,315,612 13,156,120 -- --
Redemption of Preferred A
Units.................... (386,573) (3,865,730) -- --
---------- ------------ --------- -----------
Balance, December 31,
1996..................... 2,270,569 22,705,690 1,500,000 15,000,000
Resignation of Member..... (7,503) (75,030) -- --
Redemption of Preferred A
Units.................... (1,014,705) (10,147,050) -- --
---------- ------------ --------- -----------
Balance, December 31,
1997..................... 1,248,361 12,483,610 1,500,000 15,000,000
---------- ------------ --------- -----------
Balance, March 31, 1998
(unaudited).............. 1,248,361 $ 12,483,610 1,500,000 $15,000,000
========== ============ ========= ===========
</TABLE>

8. RELATED PARTY TRANSACTIONS

A substantial portion of Knight's and Trimark's securities transactions are
conducted with securities firms which own equity interests in the Company (the
"Broker-Dealer Owners"). As measured in share volume, the Broker-Dealer Owners
and Brown accounted for 31%, 35% and 40% of the Company's order flow during
the period ended December 31, 1995 and the years ended December 31, 1996 and
1997, respectively, and 41% (unaudited) for the three months ended March 31,
1998. Moreover, five of these affiliates accounted for 29% of the Company's
total order flow for the year ended December 31, 1997 and 34% (unaudited) of
the Company's total order flow for the three months ended March 31, 1998.

Included within accrued payments for order flow on the Consolidated
Statements of Financial Condition are the following amounts payable to the
Broker-Dealer Owners and Brown:

<TABLE>
<S> <C>
December 31, 1996................................................ $2,032,039
December 31, 1997................................................ 1,990,045
March 31, 1998 (unaudited)....................................... 2,981,311
</TABLE>

F-12
<PAGE>

ROUNDTABLE PARTNERS, L.L.C.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)

As of December 31, 1997, Knight and Trimark cleared their securities
transactions through clearing brokers which own equity interests in the
Company. Effective March 9, 1998, Knight began clearing its securities
transactions through an unaffiliated clearing broker (unaudited).

Trimark and Knight lease certain computer and telephone equipment and
furniture from a leasing company which is wholly owned by two key employees of
Trimark. Rental expenses under such leases were as follows:

<TABLE>
<S> <C>
For the period March 27, 1995 through December 31, 1995............ $260,957
For the year ended December 31, 1996............................... 529,852
For the year ended December 31, 1997............................... 539,082
For the three months ended March 31, 1998 (unaudited).............. 117,644
</TABLE>

9. COMMITMENTS AND CONTINGENT LIABILITIES

The Company and its subsidiaries lease office space under noncancelable
operating leases. The office leases contain certain escalation clauses whereby
the rental commitments may be increased if certain conditions are satisfied
and specify yearly adjustments to the lease amounts based on annual
adjustments according to the Consumer Price Index. Rental expense under the
office leases was as follows:

<TABLE>
<S> <C>
For the period March 27, 1995 through December 31, 1995.......... $ 343,935
For the year ended December 31, 1996............................. 810,893
For the year ended December 31, 1997............................. 1,258,827
For the three months ending March 31, 1998 (unaudited)........... 342,669
</TABLE>

Additionally, Knight and Trimark lease computer and other equipment under
noncancelable operating leases. As of December 31, 1997, future minimum rental
commitments under all noncancelable operating leases were as follows:

<TABLE>
<CAPTION>
OFFICE OTHER
LEASES LEASES TOTAL
---------- ---------- -----------
<S> <C> <C> <C>
Year ending December 31, 1998............. $1,440,959 $2,023,951 $ 3,464,910
Year ending December 31, 1999............. 1,375,634 1,706,737 3,082,371
Year ending December 31, 2000............. 1,233,881 550,781 1,784,662
Year ending December 31, 2001............. 1,250,980 -- 1,250,980
Year ending December 31, 2002............. 1,264,181 -- 1,264,181
Thereafter through December 15, 2006...... 4,638,240 -- 4,638,240
-----------
$15,485,344
===========
</TABLE>

F-13
<PAGE>

ROUNDTABLE PARTNERS, L.L.C.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)

During 1998, the Company entered into an additional operating lease for
office space. As of March 31, 1998, future minimum rental commitments under
all noncancelable operating leases were as follows (all information is
unaudited):

<TABLE>
<CAPTION>
OFFICE OTHER
LEASES LEASES TOTAL
----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
For the period from April 1, 1998
through December 31, 1998............ $1,474,739 $1,513,864 $ 2,988,603
Year ending December 31, 1999......... 2,005,484 1,762,273 3,767,757
Year ending December 31, 2000......... 1,863,731 578,549 2,442,280
Year ending December 31, 2001......... 1,880,830 -- 1,880,830
Year ending December 31, 2002......... 1,935,468 -- 1,935,468
Thereafter through December 15, 2006.. 6,864,816 -- 6,864,816
-----------
$19,879,754
===========
</TABLE>

As of December 31, 1997 and March 31, 1998 (unaudited), the Company had
deposited an irrevocable letter of credit which was collateralized by U.S.
Treasury securities with market values of $1,541,038 and $1,533,788
(unaudited), respectively, as security for one of its operating leases.

Securities sold, not yet purchased represent obligations of Knight and
Trimark to purchase such securities at a future date. The Company may incur a
loss if the market value of the securities subsequently increases.

10. EARNINGS PER COMMON UNIT

Basic and diluted earnings per common unit ("EPS") have been calculated by
dividing earnings applicable to common units (net income) by the weighted
average common units outstanding during each respective period. Diluted
earnings per common unit also includes the potential dilutive effects of the
Preferred A Units, under the "if-converted" method, which are convertible into
Common Units on a one-for-one basis at the holder's option if outstanding five
years from the date of issuance. In determining diluted EPS, the interest
expense applicable to the Preferred A Units during each respective period has
been added back to net income. Under the "treasury stock" method applicable to
outstanding written call options, the Brown Option did not have a dilutive
effect. The following is a reconciliation of the numerators and denominators
of the basic and diluted earnings per common unit computations:

<TABLE>
<CAPTION>
FOR THE PERIOD FROM
MARCH 27, 1995 (DATE
OF INITIAL
CAPITALIZATION) THROUGH YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1996 DECEMBER 31, 1997
------------------------- ------------------------- -------------------------
NUMERATOR / DENOMINATOR / NUMERATOR / DENOMINATOR / NUMERATOR / DENOMINATOR /
INCOME SHARES INCOME SHARES INCOME SHARES
----------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Earnings applicable to
Common Units.......... $11,341,113 341,508 $36,760,602 589,948 $50,077,233 737,197
Effect of Dilutive
Securities
Preferred A Units...... 1,309,576 1,009,790 2,092,593 1,093,589 1,940,972 514,986
----------- --------- ----------- --------- ----------- ---------
Diluted EPS............. $12,650,689 1,351,298 $38,853,195 1,683,537 $52,018,205 1,252,183
=========== ========= =========== ========= =========== =========
</TABLE>

F-14
<PAGE>

ROUNDTABLE PARTNERS, L.L.C.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)

<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE THREE MONTHS
ENDED MARCH 31, 1997 ENDED MARCH 31, 1998
------------------------- -------------------------
NUMERATOR / DENOMINATOR / NUMERATOR / DENOMINATOR /
INCOME SHARES INCOME SHARES
----------- ------------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Basic EPS
Earnings applicable to
Common Units......... $10,420,070 738,097 $14,783,706 734,497
Effect of Dilutive
Securities
Preferred A Units..... 603,955 971,947 -- --
----------- --------- ----------- -------
Diluted EPS............. $11,024,025 1,710,044 $14,783,706 734,497
=========== ========= =========== =======
</TABLE>

On April 15, 1998, the Company redeemed and retired all of the outstanding
Mandatorily Redeemable Preferred A Units for their carrying value of
$12,483,610 (see Note 15).

11. EMPLOYEE BENEFIT PLANS

Trimark and Knight sponsor a 401(k) Profit Sharing Plan (the "Plan") in
which substantially all of their employees are eligible to participate. Under
the terms of the Plan, Trimark and Knight are required to make annual
contributions to the Plan equal to 50% of the contributions made by their
respective employees, up to certain limitations. The total expense recognized
with respect to the Plans was as follows:

<TABLE>
<S> <C>
For the period March 27, 1995 through December 31, 1995............ $111,544
For the year ended December 31, 1996............................... 478,308
For the year ended December 31, 1997............................... 681,927
For the three months ended March 31, 1998 (unaudited).............. 381,688
</TABLE>

12. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF
CREDIT RISK

The net receivable or (payable) for securities transactions that have not
reached their contractual settlement date amounted to ($6,196,423),
($10,407,524), ($5,126,772) and $17,504,744 (unaudited) at December 31, 1995,
1996, 1997 and March 31, 1998 (unaudited), respectively. Such amounts were
included within receivable from clearing brokers on the Consolidated
Statements of Financial Condition.

13. NET CAPITAL REQUIREMENTS

As registered broker-dealers and NASD member firms, Trimark and Knight are
subject to the Securities and Exchange Commission's Uniform Net Capital Rule
(the "Rule") which requires the maintenance of minimum net capital. Trimark
and Knight have elected to use the basic method, permitted by the Rule, which
requires that they each maintain net capital equal to the greater of
$1,000,000 or 6 2/3% of aggregate indebtedness, as defined.

F-15
<PAGE>

ROUNDTABLE PARTNERS, L.L.C.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)

At December 31, 1997, Trimark had net capital of $16,538,514, which was
$15,538,514 in excess of its required net capital of $1 million and Knight had
net capital of $39,941,753, which was $38,941,753 in excess of its required
net capital of $1 million.

At March 31, 1998, Trimark had net capital of $16,124,553 (unaudited), which
was $15,124,553 (unaudited) in excess of its required net capital of $1
million (unaudited) and Knight had net capital of $39,137,608 (unaudited),
which was $38,137,608 (unaudited) in excess of its required net capital of $1
million (unaudited).

14. CONDENSED FINANCIAL STATEMENTS OF ROUNDTABLE PARTNERS, L.L.C. (PARENT)

Presented below are the Condensed Statements of Financial Condition, Income
and Cash Flows for Roundtable Partners, L.L.C., the parent company, on an
unconsolidated basis.

STATEMENTS OF FINANCIAL CONDITION
ROUNDTABLE PARTNERS, L.L.C. (PARENT)

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- MARCH 31,
1996 1997 1998
----------- ----------- -----------
ASSETS (UNAUDITED)
<S> <C> <C> <C>
Cash and cash equivalents................. $ 2,851,690 $ 1,219,374 $ 730,161
Securities owned, at market value......... 2,035,457 1,541,038 1,533,788
Investments in subsidiaries, equity
method................................... 69,032,590 88,630,081 94,775,413
Other assets.............................. 313,466 222,908 718,835
----------- ----------- -----------
Total assets.......................... $74,233,203 $91,613,401 $97,758,197
=========== =========== ===========
LIABILITIES AND MEMBERS' EQUITY
Liabilities
Distributions on Common Units payable to
members.................................. $ 4,983,972 $ 8,405,326 $ 8,767,185
Interest payable on Preferred Units....... 596,878 424,981 416,486
Accounts payable and accrued expenses..... 460,145 826,023 600,934
Subordinated note......................... 500,000 500,000 500,000
Mandatorily Redeemable Preferred A Units.. 22,705,690 12,483,610 12,483,610
Mandatorily Redeemable Preferred B Units.. 15,000,000 15,000,000 15,000,000
----------- ----------- -----------
Total liabilities......................... 44,246,685 37,639,940 37,768,215
Total members' equity..................... 29,986,518 53,973,461 59,989,982
----------- ----------- -----------
Total liabilities and members' equity..... $74,233,203 $91,613,401 $97,758,197
=========== =========== ===========
</TABLE>

F-16
<PAGE>

ROUNDTABLE PARTNERS, L.L.C.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)

STATEMENTS OF INCOME
ROUNDTABLE PARTNERS, L.L.C. (PARENT)

<TABLE>
<CAPTION>
FOR THE PERIOD FROM FOR THE YEARS ENDED FOR THE THREE MONTHS ENDED
MARCH 27, 1995 (DATE DECEMBER 31, MARCH 31,
OF INITIAL CAPITALIZATION) ----------------------- ---------------------------
THROUGH DECEMBER 31, 1995 1996 1997 1997 1998
-------------------------- ----------- ----------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Equity in earnings of
subsidiaries........... $13,411,536 $40,094,824 $54,202,490 $ 11,447,650 $ 15,660,332
Management fee.......... 713,868 -- -- -- --
Other................... -- 216,554 148,533 35,669 97,660
----------- ----------- ----------- ------------- -------------
Total revenues........ 14,125,404 40,311,378 54,351,023 11,483,319 15,757,992
----------- ----------- ----------- ------------- -------------
EXPENSES
Interest on Preferred
Units.................. 1,309,576 2,092,593 1,940,972 603,955 416,486
Payments for order
flow................... 996,786 1,088,924 1,865,222 400,027 520,360
Other................... 477,929 369,259 467,596 59,267 37,440
----------- ----------- ----------- ------------- -------------
Total expenses........ 2,784,291 3,550,776 4,273,790 1,063,249 974,286
----------- ----------- ----------- ------------- -------------
Net income............ $11,341,113 $36,760,602 $50,077,233 $ 10,420,070 $ 14,783,706
=========== =========== =========== ============= =============
</TABLE>

F-17
<PAGE>

ROUNDTABLE PARTNERS, L.L.C.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)

STATEMENTS OF CASH FLOWS
ROUNDTABLE PARTNERS, L.L.C. (PARENT)

<TABLE>
<CAPTION>
FOR THE PERIOD
FROM
MARCH 27, 1995
(DATE OF INITIAL
CAPITALIZATION FOR THE YEARS ENDED FOR THE THREE MONTHS
THROUGH DECEMBER 31, ENDED MARCH 31,
DECEMBER 31, -------------------------- --------------------------
1995 1996 1997 1997 1998
---------------- ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERAT-
ING ACTIVITIES
Net income.............. $ 11,341,113 $ 36,760,602 $ 50,077,233 $ 10,420,070 $ 14,783,706
Equity in earnings of
subsidiaries........... (13,411,536) (40,094,824) (54,202,490) (11,447,650) (15,660,332)
(Increase) decrease in
operating assets
Securities owned....... (1,988,879) (46,578) 494,419 136 7,250
Other assets........... (612,104) 298,736 90,557 (2,640) (495,928)
Increase (decrease) in
operating liabilities
Accounts payable,
accrued expenses and
other liabilities..... 594,025 (133,880) 365,879 (42,377) (225,089)
Interest payable on
Preferred Units....... 433,440 163,438 (171,898) 7,074 (8,494)
------------ ------------ ------------ ------------ ------------
Net cash used in
operating activities.. (3,643,941) (3,052,506) (3,346,300) (1,065,387) (1,598,887)
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of general
partnership interest in
Trimark Securities,
L.P.................... (15,273,295) -- -- -- --
Capital contributions to
subsidiaries........... (22,307,090)
------------ ------------ ------------ ------------ ------------
Net cash used in
investing activities.. (37,580,385) -- -- -- --
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from issuance
of subordinated notes.. 5,000,000 500,000 -- -- --
Proceeds from issuance
of Common Units........ 3,726,480 2,940,200 -- -- --
Proceeds from issuance
of Mandatorily
Redeemable Preferred A
Units.................. 13,415,300 8,870,410 -- -- --
Proceeds from issuance
of Mandatorily
Redeemable Preferred B
Units.................. 15,000,000 -- -- -- --
Dividends received from
subsidiaries........... 7,862,754 14,191,301 34,604,999 3,404,700 9,515,000
Redemptions of
Mandatorily Redeemable
Preferred A Units...... -- (3,865,730) (10,147,050) -- --
Resignation of Member... -- -- (422,463) -- --
Distributions on Common
Units.................. (2,868,323) (17,643,870) (22,321,502) (4,983,972) (8,405,326)
------------ ------------ ------------ ------------ ------------
Net cash provided by
(used in) financing
activities............ 42,136,211 4,992,311 1,713,984 (1,579,272) 1,109,674
------------ ------------ ------------ ------------ ------------
Increase (decrease) in
cash and cash
equivalents............ 911,885 1,939,805 (1,632,316) (2,644,659) (489,213)
Cash and cash
equivalents at
beginning of period.... -- 911,885 2,851,690 2,851,690 1,219,374
------------ ------------ ------------ ------------ ------------
Cash and cash
equivalents at end of
period................. $ 911,885 $ 2,851,690 $ 1,219,374 $ 207,031 $ 730,161
============ ============ ============ ============ ============
Supplemental disclosure
of cash flow
information
Cash paid for
interest.............. $ 1,045,675 $ 2,016,244 $ 2,144,877 $ 604,724 $ 432,648
============ ============ ============ ============ ============
</TABLE>

Supplemental information pertaining to noncash investing and financing
activities

F-18
<PAGE>

ROUNDTABLE PARTNERS, L.L.C.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)

15. SUBSEQUENT EVENT--REDEMPTION OF MANDATORILY REDEEMABLE PREFERRED UNITS

On April 15, 1998, the Company redeemed and retired all outstanding
Preferred A Units for $12,483,610 and redeemed and retired 115,290 Preferred B
Units for $1,152,900.

16. PROPOSED REORGANIZATION OF THE COMPANY (UNAUDITED)

The Knight/Trimark Group, Inc. (the "Corporation") was organized in April
1998 for the purpose of succeeding to the business of Roundtable Partners,
L.L.C. (the "Company"). Concurrent with the closing of an Initial Public
Offering (the "Offering") of the Corporation's Common Stock, based on an
assumed initial public offering price of $15.00 per share, all of the member
interests of the Company will be exchanged for 36,659,585 shares of Class A
Common Stock of the Company and 3,945,528 shares of Class B Common Stock of
the Company. Certain members, who have so elected, will receive 1,741,581
additional shares of Class A Common Stock valued at the initial public
offering price with respect to their share of the undistributed income of the
Company through March 31, 1998 (the "Undistributed Profits"). Management of
the Company has elected to receive shares of Class A Common Stock for all of
their Undistributed Profits. The Company will receive no additional
consideration in connection with such conversion of member interests into
shares of Class A and Class B Common Stock. In connection with the exchange,
Knight Securities, Inc., a newly formed corporation, will become the successor
entity to Knight Securities, L.P., and Trimark Securities, Inc., a newly
formed corporation, will become the successor entity to Trimark Securities,
L.P. (the foregoing transactions, collectively, shall be referred to herein as
the "Reorganization"). Prior to the effective date of the Registration
Statement relating to the Offering, certain members of the Company, who have
so elected, will receive a cash distribution of all or a portion of their
Undistributed Profits. Concurrently with such distribution, the Company
intends to make a cash distribution to each member of an estimate of its share
of the total amount of undistributed profits of the Company accruing between
April 1, 1998 and the closing of the Offering. Additionally, Brown has agreed
with the Company that it will exercise its option to purchase 7,143 Common
Units of the Company by purchasing the equivalent shares of Class A Common
Stock of the Corporation (394,887 shares) at the closing of the Offering.

The Pro Forma Consolidated Statement of Financial Condition as of March 31,
1998 has been presented to give effect to the Reorganization as if it had
occurred as of the close of business on March 31, 1998. In addition, the Pro
Forma Consolidated Statement of Financial Condition gives effect to the
declaration of redemption of the Preferred A and B Units described in Note 15
as of March 31, 1998. The specific pro forma transactions are as follows:

. Exchange of 734,497 Common Units of the Company for 36,659,585 shares of
Class A Common Stock, par value $0.01, of the Corporation ("Class A Stock")
and 3,945,528 shares of Class B Common Stock, par value $0.01, of the
Corporation;

. Purchase of 1,741,581 shares of Class A Stock by members of the Company for
$26,123,719 from Undistributed Income of the Company;

. Declaration of cash distribution on Common Units payable to members of
$26,521,293 from Undistributed Income of the Company;

. Declaration of redemption of 1,248,361 Preferred A Units for $12,483,610;

. Declaration of redemption of 115,290 Preferred B Units for $1,152,900; and

. Exercise of the Brown Option to purchase 394,887 shares of Class A Common
Stock at a total exercise price of $71,430 and the application of the
estimated net proceeds therefrom.

The Corporation contemplates that the Offering will comprise up to
10,000,000 shares of Class A Stock (not including an underwriters' over-
allotment option of shares) comprised of 8,688,246 newly-issued shares

F-19
<PAGE>

ROUNDTABLE PARTNERS, L.L.C.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)

and 1,311,754 shares from Selling Shareholders. The Pro Forma Consolidated
Statement of Financial Condition as of March 31, 1998 does not reflect any
adjustments related to the Offering.

Prior to the Reorganization, the Company was a limited liability company and
was not subject to federal or state income taxes. Subsequent to the
Reorganization, the Corporation will be subject to federal income taxes and
state income taxes in New York, New Jersey and other states. The following pro
forma condensed consolidated statements of income give effect to the
Reorganization as if it had occurred on January 1, 1997. Pro forma income tax
expense includes pro forma amounts relating to federal income taxes, as well
as pro forma amounts relating to state income taxes in New York, New Jersey
and other states. The Company's pro forma effective tax rate of 43% differs
from the federal statutory rate of 35% primarily due to state income taxes
(6%), as well as nondeductible expenses, including the amortization of
goodwill and a portion of business development expenses (2%).

PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME:

<TABLE>
<CAPTION>
FOR THE
THREE
FOR THE YEAR MONTHS
ENDED ENDED MARCH
DECEMBER 31, 31, 1998
1997 (UNAUDITED)
------------ -----------
<S> <C> <C>
Total revenues........................................ $226,666,646 $63,532,216
Total expenses........................................ 176,589,413 48,748,510
------------ -----------
Net income as reported................................ 50,077,233 14,783,706
------------ -----------
PRO FORMA ADJUSTMENTS
Pro forma income tax expense........................ 21,533,210 6,356,994
============ ===========
Pro forma net income................................ $ 28,544,023 $ 8,426,712
============ ===========
Pro forma earnings per common unit
Basic............................................. $ 38.72 $ 11.47
Diluted........................................... $ 23.68 $ 11.47
Weighted average common units outstanding...........
Basic............................................. 737,197 734,497
Diluted........................................... 1,252,183 734,497
</TABLE>

F-20
<PAGE>

[LOGO OF KNIGHT/TRIMARK GROUP, INC. IS CENTERED ON PAGE]

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The expenses of the offering are estimated to be as follows:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee........... $ 54,280
NASD filing fee............................................... 18,900
NASDAQ listing fee............................................ 90,000
Legal fees and expenses....................................... 400,000
Accounting fees and expenses.................................. 400,000
Blue Sky fees and expenses (including legal fees)............. 10,000
Printing expenses............................................. 200,000
Transfer Agent fees........................................... 25,000
Miscellaneous................................................. 301,820
----------
TOTAL....................................................... $1,500,000
==========
</TABLE>
--------
* To be provided by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company, a Delaware corporation, is empowered by Section 145 of the
Delaware General Corporation Law (the "DGCL"), subject to the procedures and
limitations stated therein, to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding by reason of the fact that such person is or was a
director, officer, employee or agent of the Company, or is or was serving at
the request of the Company as a director, officer, employee or agent of
another corporation or other enterprise, against reasonable expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually incurred by him in connection with such action, suit or proceeding,
if such director, officer, employee or agent acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The Company is required
by Section 145 to indemnify any person against reasonable expenses (including
attorneys' fees) actually incurred by him in connection with an action, suit
or proceeding in which he is a party because he is or was a director, officer,
employee or agent of the Company or is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation or
other enterprise, if he has been successful, on the merits or otherwise, in
the defense of the action, suit or proceeding. Section 145 also allows a
corporation to purchase and maintain insurance on behalf of any such person
against any liability asserted against him in any such capacity, or arising
out of his status as such, whether or not the corporation would have the power
to indemnify him against such liability under the provisions of Section 145.
In addition, Section 145 provides that indemnification pursuant to its
provisions is not exclusive of other rights of indemnification to which a
person may be entitled under any bylaw, agreement, vote of shareholders or
disinterested directors, or otherwise.

Article 7 of the Company's Certificate of Incorporation (the "Charter")
provides that the Company shall indemnify and hold harmless any person who
was, is, or is threatened to be made a party to a proceeding by reason of the
fact that he or she (i) is or was a director or officer of the Company or (ii)
while a director or officer of the Company, is or was serving at the request
of the Company as a director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or other enterprise, to the fullest extent permitted under the
DGCL. The right to indemnification under Article 7 of the Charter is a
contract right which includes, with respect to directors and officers, the
right to be paid by the Company the expenses incurred in defending any such
proceeding in advance of its disposition.

II-1
<PAGE>

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

On March 27, 1995, Roundtable Partners, L.L.C. (the "LLC") sold an aggregate
of 304,407 common units of the LLC ("Common Units") to 22 investors, at a
price of $10 per unit, for an aggregate purchase price of $3,044,070. The LLC
also sold an aggregate of 1,095,864 Series A preferred units of the LLC
("Series A Preferred Units") to 18 investors, at a price of $10 per unit, for
an aggregate purchase price of $10,958,640. In addition, on such date, the LLC
sold an aggregate of 1,500,000 Series B preferred units of the LLC to Trimark
Securities, Inc., at a price of $10 per unit, for an aggregate purchase price
of $15,000,000.

On June 28, 1995, the LLC sold an aggregate of 23,331 Common Units to 5
investors, at a price of $10 per unit, for an aggregate purchase price of
$233,310. The LLC also sold an aggregate of 83,992 Series A Preferred Units to
a single investor, at a price of $10 per unit, for an aggregate purchase price
of $839,920.

On July 26, 1995, the LLC sold an aggregate of 33,574 Common Units to 8
investors, at a price of $10 per unit, for an aggregate purchase price of
$335,740. The LLC also sold an aggregate of 120,866 Series A Preferred Units
to 4 investors, at a price of $10 per unit, for an aggregate purchase price of
$1,208,660.

On October 25, 1995, the LLC sold an aggregate of 7,167 Common Units to 6
investors, at a price of $10 per unit, for an aggregate purchase price of
$71,670. The LLC also sold an aggregate of 25,800 Series A Preferred Units to
2 investors, at a price of $10 per unit, for an aggregate purchase price of
$258,000.

On November 29, 1995, the LLC sold an aggregate of 1,190 Common Units, at a
price of $10 per unit, for an aggregate purchase price of $11,900. The LLC
also sold an aggregate of 4,284 Series A Preferred Units, at a price of $10
per unit, for an aggregate purchase price of $42,840.

On December 27 1995, the LLC sold an aggregate of 2,979 Common Units to 6
investors, at a purchase price of $10 per unit, for an aggregate purchase
price of $29,790. The LLC also sold an aggregate of 10,724 Series A Preferred
Units to 2 investors, at a price of $10 per unit, for an aggregate purchase
price of $107,240.

On January 1, 1996, the LLC sold an aggregate of 120,849 Common Units to 5
investors, at a price of $10 per unit, for an aggregate purchase price of
$1,208,490. The LLC also sold an aggregate of 435,056 Series A Preferred Units
to a single investor, at a price of $10 per unit, for an aggregate purchase
price of $4,350,560.

On January 24, 1996, the LLC sold an aggregate of 1,699 Common Units to 5
investors, at a price of $10 per unit, for an aggregate purchase price of
$16,990. The LLC also sold an aggregate of 6,116 Series A Preferred Units to a
single investor, at a price of $10 per unit, for an aggregate purchase price
of $61,160.

On February 21, 1996, the LLC sold an aggregate of 1,783 Common Units to 5
investors, at a price of $10 per unit, for an aggregate purchase price of
$17,830. The LLC also sold an aggregate of 6,418 Series A Preferred Units to a
single investor, at a price of $10 per unit, for an aggregate purchase price
of $64,180.

On March 27, 1996, the LLC sold an aggregate of 1,190 Common Units to 6
investors, at a price of $10 per unit, for an aggregate purchase price of
$11,900. The LLC sold an aggregate of 4,284 Series A Preferred Units to 2
investors, at a price of $10 per unit, for an aggregate purchase price of
$42,840.

On April 24, 1996, the LLC sold an aggregate of 4,189 Common Units to 5
investors, at a price of $10 per unit, for an aggregate purchase price of
$41,890. The LLC also sold an aggregate of 15,080 Series A Preferred Units to
a single investor, at a price of $10 per unit, for an aggregate purchase price
of $150,800.

On May 29, 1996, the LLC sold an aggregate of 60,160 Common Units to 7
investors, at a price of $10 per unit, for an aggregate purchase price of
$601,600. The LLC also sold an aggregate of 216,575 Series A Preferred Units
to 3 investors, at a price of $10 per unit, for an aggregate purchase price of
$2,165,750.

On June 26, 1996, the LLC sold an aggregate of 29,809 Common Units to 10
investors, at a price of $10 per unit, for an aggregate purchase price of
$298,090. The LLC also sold an aggregate of 107,312 Series A Preferred Units
to 6 investors, at a price of $10 per unit, for an aggregate purchase price of
$1,073,120.

On July 24, 1996, the LLC sold an aggregate of 12,001 Common Units to 7
investors, at a price of $10 per unit, for an aggregate purchase price of
$120,010. The LLC also sold an aggregate of 43,203 Series A Preferred Units to
3 investors, at a price of $10 per unit, for an aggregate purchase price of
$432,030.

II-2
<PAGE>

On October 1, 1996, the LLC sold an aggregate of 133,769 Common Units to 12
investors, at a price of $10 per unit, for an aggregate purchase price of
$1,337,690. The LLC also sold an aggregate of 481,568 Series A Preferred Units
to 8 investors, at a price of $10 per unit, for an aggregate purchase price of
$4,815,680.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits+:

<TABLE>
<C> <S>
+1.1 Form of Underwriting Agreement.
+3.1 Form of Amended and Restated Certificate of Incorporation of the
Registrant.
+3.2 Form of Amended and Restated By-laws of the Registrant.
+4.1 Specimen Common Stock certificate.
+4.2 Form of Registration Rights Agreement.
+5.1 Form of Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
++10.1 Clearing Agreement between Knight Securities, L.P. and Correspondent
Services Corporation, dated April 23, 1997.
++10.2 Clearing Agreement between Trimark Securities, L.P. and National
Investor Service Corporation, dated June 29, 1997.
+10.3 Lease Agreement between Newport L.P.-I, Inc. and Knight Securities,
L.P. dated December 6, 1994 (the "Knight Lease Agreement") for
office space situated in Newport Office Tower, 525 Washington
Boulevard, Jersey City, New Jersey 07310.
+10.4 Amendment to the Knight Lease Agreement, dated May 28, 1996.
+10.5 Second Amendment to the Knight Lease Agreement, dated September 30,
1997.
+10.6 Third Amendment to the Knight Lease Agreement, dated March 18, 1998.
+10.7 Lease Agreement between Nestle USA, Inc. and Trimark Securities
L.P., dated March 20, 1996, for the office space situated at 100
Manhattanville Road, Purchase, New York 10577.
+10.8 License Agreement between Automated Securities Clearance, Ltd. and
Knight Securities, L.P., dated April 5th, 1995.
+10.9 Master Program Product License Agreement between TCAM Systems, Inc.
and Trimark Securities, Inc. dated May 1, 1990.
+10.10 Form of Employment Agreement between the Registrant and Kenneth
Pasternak.
+10.11 Form of Employment Agreement between the Registrant and Walter
Raquet.
+10.12 Form of Employment Agreement between the Registrant and Steven
Steinman.
+10.13 Form of Employment Agreement between the Registrant and Robert
Lazarowitz.
+10.14 Form of Employment Agreement between the Registrant and Anthony
Sanfilippo.
+10.15 Form of Registrant's 1998 Stock Option and Award Plan.
+10.16 Form of Registrant's 1998 Nonemployee Director Stock Option Plan.
+10.17 Form of Registrant's Management Incentive Performance Plan.
+21.1 Subsidiaries of the Registrant.
*23.1 Consent of Price Waterhouse LLP.
+23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (contained in
Exhibit 5.1 hereto).
+24.1 Powers of Attorney.
+27 Financial Data Schedule.
</TABLE>
- --------
* Filed herewith.
+ Previously filed unless otherwise indicated.

++ Confidential treatment has been requested for portions of this exhibit. The
copy previously filed omits the information subject to the confidentiality
request. Omissions are designated as *****. A complete version of this
exhibit has been filed separately with the Securities and Exchange
Commission.

(b) Consolidated Financial Statement Schedules

All schedules are omitted because the required information is inapplicable
or the information is presented in the Consolidated Financial Statements or
related notes.

II- 3
<PAGE>

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-4
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN JERSEY CITY, STATE OF
NEW JERSEY, ON THE 10TH DAY OF JUNE, 1998.

Knight/Trimark Group, Inc.

/s/ Walter F. Raquet
By: _________________________________

WALTER F. RAQUET Director and
Executive Vice President

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.

SIGNATURE TITLE DATE

*
- ------------------------------------- Director, President June 10, 1998
and Chief Executive
(KENNETH D. PASTERNAK) Officer

* Director, Executive June 10, 1998
- ------------------------------------- Vice President and
Chief Financial
(ROBERT I. TURNER) Officer (principal
financial and
accounting officer)

* Director and
- ------------------------------------- Chairman of the June 10, 1998
(STEVEN L. STEINMAN) Board

* Director and
- ------------------------------------- Executive Vice June 10, 1998
(WALTER F. RAQUET) President

* Director and
- ------------------------------------- Executive Vice June 10, 1998
(ROBERT M. LAZAROWITZ) President

II-5
<PAGE>

SIGNATURE TITLE DATE

* Director and
- ------------------------------------ Executive Vice June 10, 1998
(ANTHONY M. SANFILIPPO) President

* Director
- ------------------------------------ June 10, 1998
(MARTIN AVERBUCH)

* Director
- ------------------------------------ June 10, 1998
(CHARLES V. DOHERTY)

* Director
- ------------------------------------ June 10, 1998
(GENE L. FINN)

* Director
- ------------------------------------ June 10, 1998
(GARY R. GRIFFITH)

* Director
- ------------------------------------ June 10, 1998
(BRUCE R. MCMAKEN)

Director
- ------------------------------------ June 10, 1998
(J. JOE RICKETTS)

* Director
- ------------------------------------ June 10, 1998
(RODGER O. RINEY)

June 10, 1998

Director
- ------------------------------------
(V. ERIC ROACH)

June 10, 1998

Director
- ------------------------------------
(CHARLES A. ZABATTA)

/s/ Walter F. Raquet
*By: _______________________________
ATTORNEY IN FACT

II-6
<PAGE>

INDEX TO EXHIBITS+

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
+1.1 Form of Underwriting Agreement.
+3.1 Form of Amended and Restated Certificate of Incorporation of
the Registrant.
+3.2 Form of Amended and Restated By-laws of the Registrant.
+4.1 Specimen Common Stock certificate.
+4.2 Form of Registration Rights Agreement.
+5.1 Form of Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
++10.1 Clearing Agreement between Knight Securities, L.P. and
Correspondent Services Corporation, dated April 23, 1997.
++10.2 Clearing Agreement between Trimark Securities, L.P. and
National Investor Service Corporation, dated June 29, 1997.
+10.3 Lease Agreement between Newport L.P.-I, Inc. and Knight
Securities, L.P. dated December 6, 1994 (the "Knight Lease
Agreement") for office space situated in Newport Office Tower,
525 Washington Boulevard, Jersey City, New Jersey 07310.
+10.4 Amendment to the Knight Lease Agreement, dated May 28, 1996.
+10.5 Second Amendment to the Knight Lease Agreement, dated September
30, 1997.
+10.6 Third Amendment to the Knight Lease Agreement, dated March 18,
1998.
+10.7 Lease Agreement between Nestle USA, Inc. and Trimark Securities
L.P., dated March 20, 1996, for the office space situated at
100 Manhattanville Road, Purchase, New York 10577.
+10.8 License Agreement between Automated Securities Clearance Ltd.
and Knight Securities, L.P., dated April 5th, 1995.
+10.9 Master Program Product License Agreement between TCAM Systems,
Inc. and Trimark Securities, Inc. dated May 1, 1990.
+10.10 Form of Employment Agreement between the Registrant and Kenneth
Pasternak.
+10.11 Form of Employment Agreement between the Registrant and Walter
Raquet.
+10.12 Form of Employment Agreement between the Registrant and Steven
Steinman.
+10.13 Form of Employment Agreement between the Registrant and Robert
Lazarowitz.
+10.14 Form of Employment Agreement between the Registrant and Anthony
Sanfilippo.
+10.15 Form of Registrant's 1998 Long Term Incentive Plan.
+10.16 Form of Registrant's 1998 Nonemployee Director Stock Option
Plan.
+10.17 Form of Registrant's Management Incentive Performance Plan.
+21.1 Subsidiaries of the Registrant.
*23.1 Consent of Price Waterhouse LLP.
+23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (contained
in Exhibit 5.1 hereto).
+24.1 Powers of Attorney.
+27. Financial Data Schedule.
</TABLE>
- --------
* Filed herewith.
+ Previously filed unless otherwise indicated.

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in this Amendment No. 3 to the Prospectus
constituting part of this Registration Statement on Form S-1 of our report
dated February 10, 1998, except as to Note 15, which is as of April 15, 1998,
relating to the consolidated financial statements of Roundtable Partners
L.L.C., which appears in such Prospectus. We also consent to the references to
us under the heading "Experts" in such Prospectus.

PRICE WATERHOUSE LLP

New York, New York

June 9, 1998