Archipelago Offers Instant Trading in Exchange-Listed Shares
Chicago, May 3 (Bloomberg) -- Archipelago LLC, seeking to
steer trades from the New York Stock Exchange to its electronic
network, has begun accepting orders to buy or sell shares traded
primarily on the NYSE.
Brokers, institutional investors and other Archipelago
customers can use the Archipelago Listed Book system to enter
orders in shares of the NYSE's 3,025 companies. American Stock
Exchange-listed companies' shares are also eligible.
Matching ``buy'' and ``sell'' orders will be executed in less
than a second, Archipelago said. That's a fraction of the 24
seconds needed on average to trade via the NYSE's electronic
Designated Order Turnaround system, or DOT, according to
Archipelago. The NYSE said the average time is closer to 20
seconds.
The expansion, part of Archipelago's plan to become a full-
fledged stock exchange by teaming up with the San Francisco-based
Pacific Exchange later this year, is the latest sign of how for-
profit firms are using computers in an effort to take business
from older exchanges' trading floors.
Archipelago is one of nine ``electronic communications
networks,'' or ECNs, authorized by the Securities and Exchange
Commission to display and match orders. Some others, including
Datek Online Holdings Corp.'s Island ECN Inc. and Reuters Group
Plc's Instinet Corp., also trade NYSE stocks.
Moreover, that figure may not be comparable to Archipelago's
less-than-a-second boast. NYSE spokesman Ray Pellecchia said the
NYSE's own estimate goes ``from point of origin, to execution and
back,'' including ``time to expose the order to the market.''
Rule 390
ECNs have stepped up their pursuit of the NYSE business since
the exchange's vote, in December, to shelve Rule 390. The rule,
called anti-competitive by SEC Chairman Arthur Levitt, barred
trading of some stocks anywhere but the NYSE floor.
The new system also handles trades from 8 a.m. to 8 p.m. The
NYSE's hours go from 9:30 a.m. to 4 p.m.
Orders that don't find matches in Archipelago's Listed Book
will, however, be routed to the appropriate exchanges, a service
that the three-year-old trading firm has offered before.
For NYSE stocks, that means going through the DOT system
which, though electronic, requires a specialist on the NYSE floor
to execute each trade. There's no estimate of the portion of
orders that will be passed from the ECN to an exchange, said
Archipelago spokeswoman Margaret Nagle.
Chicago-based Archipelago transmits orders to NYSE's DOT, and
to Amex, via unidentified sponsors that are members of the
exchanges. The firm's owners include NYSE member firms Goldman
Sachs Group Inc. and Merrill Lynch & Co.
Connection
The Pacific Exchange agreement, if approved by the SEC, will
give Archipelago oversight of the exchange's stock trading, not
its options business. It would also hook Archipelago up to the
Intermarket Trading System, a connection among U.S. exchanges,
letting it trade in NYSE, Amex and Nasdaq Stock Market stocks.
Booming volume is adding to the allure of the exchange
business for ECN operators. Daily volume averaged more than 1
billion shares at the end of March, up 36 percent from the 799.8
million recorded a year earlier, the NYSE said. Archipelago says
its volume is 50 million to 60 million shares a day.
Archipelago's Listed Book system passed tests in recent
months to make sure it will function properly even amid the
trading surge.
``We monitor the servers and, if we see spikes, we can re-
allocate or add another server, or whatever,'' said Nagle. ``It's
very easy for us to add more capacity if needed.''
Bloomberg News is a unit of Bloomberg L.P., whose Bloomberg
Tradebook L.L.C. unit competes with Archipelago and other ECNs. |
