Instinet Group Is Holding Talks to Buy Island ECN
Wednesday, May 15, 2002 11:35 PM ET
Instinet Group Inc. is in talks to purchase Island ECN, a deal valued at potentially more than $500 million that would combine the two biggest electronic stock-trading networks and could pose a growing challenge to the long- established exchanges, especially the Nasdaq Stock Market, The Wall Street Journal reported for Thursday's edition.
Upstart Island recently edged out once-dominant Instinet as the market leader in trading volume. But Instinet, a publicly traded company that is majority- owned by British media and technology firm Reuters PLC, would be the buyer because it is a much bigger company overall, according to people familiar with the discussions.
Though some of the details are yet to be worked out and negotiations may not result in a deal, talks are progressing and an agreement could be announced by the end of the month, these people say. A spokesman for Instinet said the company doesn't comment on rumors, and a spokesman for Island had no comment.
Market watchers long have anticipated consolidation would take place in the fragmented market of electronic-communications networks, known as ECNs, which became popular in the late 1990s along with the online-trading explosion. ECNs anonymously match buy and sell orders, often offering cheaper and faster electronic executions and bypassing the stock exchanges.
Together, Island and Instinet handle about 22% of all share volume in Nasdaq Stock Market listed companies. By joining forces, they could offer more liquidity -- including better pricing and ease of trading -- and attract a larger base of both institutional investors and small investors, with fast technology and shelf space on nearly every major trading desk.
The new entity could pose a major threat to Nasdaq, which is attempting to win back market share from ECNs and trading firms with a new, souped-up trading system called SuperMontage that is to be unveiled this summer. Though no ECN has yet made significant inroads into New York Stock Exchange-listed stock trading, over the long term a combined Instinet and Island could be poised to snatch a piece of the trading action off the Big Board's floor as well.
Wall Street Journal staff reporters Kate Kelly and Robert Frank contributed to this report.
Copyright 2002 Dow Jones & Company, Inc. |
