Tradescape.com Says It Will Acquire MarketXT
New York, Feb. 10 (Bloomberg) -- Tradescape.com Inc., a
closely held firm catering to active traders, agreed to pay $100
million in stock to buy MarketXT Inc., which offers a 5-month-old
after-hours stock trading system that's been slow to take off.
MarketXT will receive about 10 percent of the stock of
Tradescape.com, which is considering an initial public offering in
the second half of the year. The combination is intended to form
an all-electronic competitor to the New York Stock Exchange and
Nasdaq Stock Market.
``We are creating an entirely new business model,' said
Tradescape.com Chief Executive Omar Amanat, a 27-year-old former
Citibank derivatives trader. ``We're combining all the different
aspects of Wall Street into a single integrated platform.'
Tradescape.com offers software and brokerage services to full-
time active traders, using ``smart-order routing' to help them
find the best prices for stock. It emphasizes active traders, who
may buy and sell the same stock repeatedly in a day.
Last June, the firm acquired Momentum Securities of Houston,
a brokerage serving day traders, and received $40 million in
financing from Softbank Corp. and J.W. Childs Associates LP.
Tradescape's business is exploding, Amanat said. With average
daily volume of about 40 million shares a day, revenue jumped to
$75 million last year from $14 million in 1998. He declined to
discuss earnings. The company is closing its day-trading offices
in New York, Chicago and Los Angeles, and moving customers to
Internet trading.
After-Hours System
MarketXT advertises itself as the after-hours system designed
specifically for individual investors, but it's been overshadowed
by systems that cater to active traders. Its busiest stock last
night, MCI WorldCom Inc., traded 7,700 shares. In contrast, the
Island ECN executed 40,336 shares of WorldCom, and that was its
12th-busiest issue. Island's busiest stock was a $7 million
specialty commercial finance company called T&W Financial Corp. It
traded more than 1 million shares.
MarketXT's investors include some of Wall Street's biggest
brokerages -- Morgan Stanley Dean Witter, Salomon Smith Barney and
Bernard L. Madoff Investment Securities. Tradescape.com will be
targeting them, as well as mutual funds and pension funds.
``The real opportunity is in the institutional buy side,'
Amanat said.
Within coming months, MarketXT plans to open at 6 a.m. and go
head-to-head against the traditional markets by matching buyers
and sellers during the day. Unlike other electronic trading
networks, known as ECNs, which emphasize Nasdaq issues, MarketXT
already trades both NYSE-listed and Nasdaq shares.
Tradescape.com, which executes 40 million trades a day, also
announced a new round of $100 million financing, led by Softbank.
Consolidation
The Tradescape.com-MarketXT transaction comes just days after
E*Trade Group Inc., the No. 2 Internet broker, ended talks to buy
Tradescape.com, according to people familiar with the situation.
Menlo Park, California-based E*Trade and Tradescape.com
concluded several months of talks, the people said, just days
before the biggest Internet broker, Charles Schwab Corp., agreed
to acquire Tradescape.com rival CyberCorp Inc. for $487 million in
stock.
Michael Sanderson, MarketXT's chief executive and a former
CEO of Reuters Plc's Group Instinet Corp., will become chairman of
Tradescape.com.
MarketXT lacked strong allies on the Internet. The company
originally wanted customers from Schwab and Fidelity Investments,
said MarketXT President Michael Satow. Instead, Schwab and
Fidelity created their own ECN with trading giant Spear, Leeds &
Kellogg.
``We had to adjust our strategy,' Satow said.
Amanat said other purchases may be in Tradescape.com's
future. ``We have a very aggressive growth plan,' he said in a
conference call with reporters. ``We plan to be an acquirer rather
than a seller.' |
