MARKETXT HALTED; E-TRADE AUDITS TRADESCAPE
By Isabelle Clary
Senior Staff Reporter
MarketXT, the electronic communications network that roared on Nasdaq's SuperSoes auto-execution system, has stopped trading since July 30, soon after switching clearing firms to Penson Financial Services from SWS Securities.
A spokeswoman for MarketXT said the stoppage was due to a technical problem. "As the separation with the E-Trade businesses continues, we are moving our data center and server systems to an independent location....We are opting to keep the ECN closed until all technical issues are resolved."
According to industry sources, MarketXT owed SWS Securities $2 million in unpaid fees when it made its move to Penson. This prompted SWS to complain to regulators responsible for ensuring that U.S. broker-dealers comply with rules, such as net capital requirements, sources said.
SWS Securities, to which MarketXT had switched from UBS PaineWebber seven months ago, declined comment.
In June, E-Trade acquired Tradescape Corp., the parent of MarketXT, Momentum Securities, an electronic broker for professional traders, Tradescape Securities, a direct-access broker for active online traders, and Tradescape Technologies. The merger, valued at up to $280 million, did not include MarketXT.
"E-Trade has auditors currently going over the Tradescape books," a spokeswoman for E-Trade confirmed, adding that this was not an uncommon practice following a merger.
Tradescape CEO Omar Amanat, who had taken the position of head of institutional trading at E-Trade, recently left the company to return to MarketXT. His move coincided with E-Trade's reassessment of the value of the Tradescape acquisition.
The E-Trade spokeswoman also said the company never comments on staff changes.
E-Trade bought Tradescape for $100 million in stock, plus up to $180 million in stock, if Tradescape topped profits targets. E-Trade, traded on the New York Stock Exchange, had expected Tradescape to contribute 10 percent to earnings growth in 2003. Softbank is a major investor in both Tradescape and E-Trade.
MarketXT, the first ECN to join SuperSoes in December 2001, quickly soared to the top spot among SuperSoes liquidity providers. But soon after E-Trade's acquisition of Tradescape, MarketXT saw its volume drop, which industry sources said reflected the fact that Momentum Securities was no longer sending order flow there. A number of former Momentum clients also claim that the broker owes them money for past trading activity, sources said. |
