Instinet mulls link with U.S. exchange for Inet
Wed Oct 13, 2004 12:24 PM ET
PARIS, Oct 13 (Reuters) - Electronic share trading company Instinet Group (INGP.O: Quote, Profile, Research) is mulling whether its U.S. Inet division should team-up with a U.S. exchange as a way of obtaining exchange status in the world's biggest stock market.
In an interview in Wednesday's edition of French financial daily Les Echos, Instinet's Chief Executive Edward Nicoll said such a move was one way for Inet to become an exchange.
Asked about a possible tie-up with the Philadelphia Stock Exchange, Nicoll said: "The question is to find out whether Instinet should go through the process (to get the exchange status) alone or via collaboration with a regional exchange."
"It would be more profitable for Inet to obtain an exchange status rather than remain a simple ECN (Electronic Communication Network)," Nicoll told Les Echos.
"Thanks to this status, the costs of compensating client orders would be lower, allowing us to be more aggressive against competition from traditional market players," he added.
Instinet is majority-owned by Reuters Group Plc (RTR.L: Quote, Profile, Research) .
An Instinet Group spokesman in New York confirmed Inet was considering becoming an exchange and was in contact with the industry regulator, the Securities and Exchange Commission (SEC).
"We are currently in discussion with SEC staff about an application," the spokesman said.
A transformation by Inet into an exchange would follow a trend in the ECN sector which has undergone a shake-up.
Archipelago, a rival trading company, snapped up another ECN, REDIBook, before teaming up with the Pacific Exchange to obtain exchange status to compete better with the Nasdaq market.
Benn Steil, an exchanges expert at the Council on Foreign Relations in New York, said Archipelago's decision to team up with a company that was already an exchange did not prove to be cheap or fast.
"I would be very surprised if Instinet chose to replicate that strategy. It's not immediately obvious to me why in the end Instinet would benefit from having exchange status," Steil said.
Steil said the threat to become an exchange could be used by Instinet as leverage to cut a better deal with the exchange it routes trades through.
Asked about Instinet's ties with its majority owner, global news and information company Reuters Group Plc (RTRSY.O: Quote, Profile, Research) , Nicoll said: "Today we have good relations with our parent company. If tomorrow another group wanted to take over, it would be important that we know its view for our company." |
