Japan's Softbank Plans Big Stake In OptiMark Trading System
By GREG IP
Staff Reporter of THE WALL STREET JOURNAL
July 2, 1999
Uniting two high-profile players in the rapidly evolving world of electronic stock trading, Japan's Softbank Corp. is planning a major investment in the OptiMark trading system, say people familiar with the matter.
The expected investment would be a boost to OptiMark Technologies Inc., based in Jersey City, N.J. The closely held company's "black box" system for matching large institutional stock trades has won much praise but so far only limited volume.
Softbank, which has investments in numerous technology-related ventures, is expected to invest between $75 million and $100 million, said people familiar with the matter. How and when the money would be invested couldn't be determined. But barring unexpected obstacles, it would be among Softbank's largest technology investments to date.
William Lupien, chairman of OptiMark, said, "We are in the process of raising $100 million and we will be announcing something shortly, but we can't say anything beyond that. Nothing is a done deal until it's done."
Philip Keuper, a public-relations consultant and spokesman for Softbank, declined to comment.
OptiMark enables investors to enter complicated orders, specifying how much they're willing to pay for how much stock, then anonymously find the optimal match with other investors through a computer algorithm.
Softbank has already entered a joint online brokerage venture with E*Trade Group Inc. in Japan and is a partner with the Nasdaq Stock Market in the proposed new market known as Nasdaq-Japan. Indeed, OptiMark and Softbank already know each other through separate partnerships with Nasdaq, which is scheduled to install OptiMark sometime in the next three months. Its parent, the National Association of Securities Dealers, has the right to acquire an ownership interest in OptiMark through warrants.
OptiMark also has a presence in Japan, through a joint venture to install the system on the Osaka Securities Exchange.
Dow Jones & Co., publisher of The Wall Street Journal and the Interactive Journal, owns a minority stake in OptiMark Technologies.
The OptiMark system began trading New York Stock Exchange-listed stocks on the Pacific Exchange at the end of January. Although volume hit 1.45 million shares a day by late February, it has declined since, according to most accounts. (The company has released no new data.)
"I had higher expectations," acknowledges Mr. Lupien. But that "doesn't mean it isn't working well. If you compare it to other new systems, it's off to a very good start."
Its backers attribute the slow start to traders' unfamiliarity with the complex order-entry process, and obstacles put up by the Big Board to better integrating OptiMark into the system linking the country's stock markets. In addition, there's lots of volume for investors to trade "in regular venues" like the Big Board, one of the system's backers said. |
