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Strategies & Market Trends : The Final Frontier - Online Remote Trading
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To: LPS5 who wrote (8038)3/16/2000 7:36:00 AM
From: TFF  Read Replies (1) of 12617
 
Archipelago and the Pacific Exchange are teaming up to form the US's first fully electronic stock exchange. We've been telling you to be on the lookout for developments in this area and this is an important one. Archipelago is the smallest of the ECN electronic trading networks that have been growing like wildfire since the mid '90s. Reuters' (RTRSY) Instinet is the leading ECN and is also involved indirectly in yesterday's Archipelago/Pacific Exchange deal. Last July, Instinet acquired a 16.4% interest in Archipelago, joining a distinguished group of investors that include Internet broking powerhouse E-Trade (EGRP) and investment banker Goldman Sachs (GS). We believe that yesterday's announcement makes it likely that Instinet will seek to gain control of Archipelago. Instinet recently broke off merger talks with Island ECN because of antitrust concerns, concerns that would be far less of a problem with Archipelago because of its position as the smallest of the ECNs. The deal with the Pacific Exchange solves a big problem for Archipelago and creates a big opportunity for Instinet. Archipelago has for some time been struggling with the SEC over its application to convert from broker regulatory status into a stock exchange. Archipelago gains its stock exchange regulatory status instantly through its deal with Pacific Exchange. For Instinet, acquiring control of Archipelago and its status as a stock exchange would be a big step forward for its plan to dominate the emerging market in electronic securities trading. Since Instinet plans to go after the retail securities market - currently Instinet volume is dominated by Wall Street market makers - preserving Instinet's status as a broker is critical. By acquiring Archipelago and keeping it as a separate unit, Instinet could shift its institutional order flow to Archipelago. That would allow Instinet to concentrate on retail growth opportunities. The potential for synergies here are tremendous for Instinet, with the electronic stock exchange on the one hand and the retail brokerage on the other. The combination would be so powerful that it would be bound to meet resistance from Wall Street brokerage firms, firms like Archipelago investor Goldman Sachs. E-Trade, however, would probably be delighted to be hooked into an Instinet/Archipelago combination. We'll be watching developments here closely and be keeping you posted. One thing's for sure, the Reuters story gets more and more compelling daily (see earlier story on TIBX for more). - TJ
Briefing.com
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