Instinet Chief Atkin Steps Down
As Parent Reuters Weighs Options
By KATE KELLY and ROBERT FRANK
Staff Reporters of THE WALL STREET JOURNAL
In another sign of the tough times facing the electronic stock-trading world, Instinet Group Inc. Chief Executive Douglas M. Atkin resigned, as the company's British parent stepped up efforts to sell or merge the trading system.
Mr. Atkin's departure continues a retrenchment for Instinet, which started in 1969 and is the grand-daddy of electronic trading. After a partial public stock offering last May, amid hopes that such trading systems could take on their bigger and better-known brethren such as the Nasdaq Stock Market and the New York Stock Exchange, Instinet's stock has fallen by more than half, and last month it warned investors that it may report a loss for the first quarter.
Instinet's woes stem from the stock-market slump, which has slowed growth in electronic trading, and by intense competition. Still, its difficulties have been surprising given the deep pockets of its majority owner, Reuters Group PLC.
Analysts say Reuters has found it difficult to maintain Instinet's incumbency as the No. 1 electronic stock trader while growing it as a more full-service brokerage firm with services like independent equity research and fixed-income trading. Instinet has been squeezed on the one hand by smaller and more-nimble electronic communications networks, such as Island ECN -- which, though a relative newcomer, late last year overtook Instinet as the top electronic stock trader by market share -- and on the other by Nasdaq, which has beefed up its electronic offerings, invading Instinet's turf.
Traders have complained that the fees charged by Instinet, which caters to big institutional investors, are higher and its technology is behind the curve, resulting in lower trading volumes that make it difficult for the company to cover a costlier corporate overhead.
According to people familiar with the situation, Reuters is exploring a range of options for Instinet that could include everything from an outright sale to merging the unit with a larger player. Reuters CEO Thomas Glocer wouldn't comment on its plans for Instinet.
"Reuters wants to know that after the dust clears from consolidation, they have a position in something that's a long-term survivor," said someone close to the company. "They're looking at a lot of options."
A third possibility is to buy back the shares Reuters floated to the public last year. But Reuters, which currently owns 83% of the company, isn't likely to buy back Instinet's public stake unless the move is part of a larger merger deal, the person added.
Though the prospect of a deal remains fluid, Wall Street has been buzzing about Mr. Atkin's rocky relationship with his corporate parent for most of this year.
But it was within the past several weeks that the chief executive's critics gained momentum. Tuesday, the company said Mr. Atkin was leaving "to pursue other business interests." Mark Nienstedt, who has been chief financial officer, was named acting president and CEO, and Jean-Marc Bouhelier, who heads Instinet's U.S. institutional and professional business, was appointed chief operating officer to succeed Kenneth K. Marshall, who announced plans to retire.
In an interview, Mr. Atkin characterized his departure as a "joint decision" between him and the Instinet board, marking the endpoint of a continuing dialogue that had intensified in the past couple of days. "It's just time to part amicably," said Mr. Atkin, whose last day at Instinet was Tuesday. "I want to do some other things."
Mr. Atkin, 39 years old, was hired at Instinet 17 years ago through a friendship that developed between his mother and a woman who worked as a secretary for Instinet's CEO at the time. The two commuted together from Princeton, N.J., to New York City, and it was through the secretary that Mr. Atkin got his first job at Instinet as a stock trader in 1985.
Mr. Atkin said he had no regrets. "I think Instinet on a relative basis is actually as strong as it's ever been," he said. "The over-the-counter," or Nasdaq, "side of the business is going through a major sea change ... and market makers," or Nasdaq traders, "are feeling the effects of that. And so did Instinet. But the model that Instinet broke globally is still extremely strong."
People familiar with the matter say Instinet didn't want to name permanent executives to the top positions until Reuters resolved the larger issues related to Instinet's future. Mr. Nienstedt is likely to remain CEO until Reuters makes a decision to either sell or merge the company, the people said.
"The Instinet board will be looking at ... what is the right set of people to take the business forward," Mr. Glocer said in an interview late Tuesday.
If Instinet were to break free of Reuters, one possible partner would be the American Stock Exchange, which has been put up for sale by its parent, the National Association of Securities Dealers. Officials from the NASD are scouring the financial markets for ways to offload the century-old Amex and focus almost entirely on the business of regulation.
Early last year, Mr. Atkin held talks with Robert Glauber, chairman and CEO of NASD, about the possibility of an alliance with the Amex -- a deal that, given Amex's self-regulatory status, would have offered Instinet an alternative to being monitored by the NASD.
However, Instinet at the time opted to focus on its coming initial public offering and put off the idea of an Amex partnership. According to a person familiar with the matter, the talks between Instinet and the NASD about an Amex deal recently have been renewed. Amex and the NASD both declined to comment.
Unlike Ameritrade Holding Corp. and E*Trade Group Inc., companies that provide individual, or retail, investors with the ability to buy and sell stocks online, Instinet caters entirely to a customer base of institutional, or professional, investors, who trade through front-end systems contained in Instinet terminals on their trading desks.
Write to Kate Kelly at kate.kelly@wsj.com and Robert Frank at robert.frank@wsj.com
Updated April 10, 2002
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