Knight Capital Group, Inc. KCG
Q2 2012 Earnings Call Transcript

Operator: Rich Repetto, Sandler O'Neill.

Rich Repetto - Sandler O'Neill: I guess the first question is just on the balance sheet, the assets, you had the biggest increase, I noticed a part of it has to do with the securitization I guess (paid) on the balance sheet that you mentioned Steve, but I guess trying to get a feel for how big the balance sheet will get and some of the moving parts in the quarter.

Steven Bisgay - Senior MD and CFO: Sure, so let’s talk about first the moving parts in the quarter. As you know, because it all the sale accounting we are still grossing up our balance sheet and we did about 470 on a fair value, that works out to be about, approximately $470 million to $500 million of securitized HECM loan inventories. So that’s a significant increase. We also did pickup futures business, the pension future business and on both the asset side and the liability side. It is about $450 million of customer funds and therefore segregated cash and other securities, as well as deposits like clearing – at the clearing stages. As well as increased (set) lending activity as well. As you can see we started actually doing more fixed income clearing and with that we have to finance that inventory and with that that does actually gross up our balance sheet as well. So on the whole there was significant growth quarter-over-quarter and certainly from the beginning of the year, mostly because of our growth in our business overall.

Rich Repetto - Sandler O'Neill: Then just another you mentioned the $10 million in investment income or a tax treatment. Can you tell us what investment that is…

Steven Bisgay - Senior MD and CFO: Well, I don’t know that I will get into specific investment. It is a strategic investment we accounted for under the equity method of accounting. They had a change in tax status in connection with an internal reorg that gave rise to the recognition of deferred tax assets and a corresponding tax benefit. We pick up our pro rata share of the tax benefit. So from that perspective our investment will increase by the $10 million and we picked up this one-time gain, which was a recognition of a tax benefit one-time as well.

Rich Repetto - Sandler O'Neill: The last question is for Tom. Related Facebook, it was interesting how you broke the $35.4 million loss between institutional and market-making. I guess, the question Tom is, there is still as you said NASDAQ hasn't submitted the accommodation plan – formerly submitted, I am just trying to see we seem like (indiscernible) information back you because they haven't submitted. Have you had conversations with NASDAQ or the SEC. Is it moving forward and I guess the question is still any reconciliation between how you are calculating your 35.4 versus NASDAQ trying to at least in the initial plan accommodate the whole industry for 40?

Thomas M. Joyce - Chairman and CEO: Yeah, we are pretty sure we lost 35.4, so we are not worrying about our numbers. There is always dialog going on, you will have to call NASDAQ and ask them why there hasn't been more information coming out on their side, but on our side thanks to the hard work of many members of the team certainly including Leonard Amoruso in our General Counsel's office. We have been in consistent dialog with NASDAQ so they know where we stand and we are going to be all eyes and ears waiting to watch and read and hear about what they suggest in their filing. I assume that's coming soon, but I don't want to speak for them.