Ashton Technology Group, Inc.
NASDAQ: ASTN
Renown Wall Street innovator intends to trade on his expertise to capitalize on $600 billion electronic trading market. Few institutions have benefited from the stunning current performance of the US economy as much as the US stock market - which keeps approaching record highs undreamt of even a few years ago. The number of shares being traded daily in the US stock market has grown so large that traditional exchanges, staffed by people working on an exchange floor or through a computerized network, are having a hard time keeping up.
The combined NASDAQ-New York Stock Exchange volume of 297 billion shares traded in 1997 represented a whopping 57% increase over the 108 billion shares traded just two years ago! This trend has jump-started the demand for alternative exchanges that can offer greater efficiency, enhanced anonymity, and lower settlement and trading costs to managers controlling the large retirement fund accounts driving this rapid growth.
At the same time, advances in electronic and communications technology are changing the nature of the financial services industry. An August 10, 1998 Business Week feature story reported that "a flurry of new trading mechanisms is about to transform today's largely antiquated exchanges into 21st Century cybermarket - floorless, global and highly automated." The magazine further reports that investors are going online in record numbers - providing burgeoning electronic brokers with 5.3 million customers with $223 billion in assets by the end of 1998.
Where can investors go to find one of the most advanced alternative trading systems emerging in this rapidly evolving marketplace? They should look to Ashton Technology Group, Inc. (NASDAQ:ASTN), an electronic trading system that marries the most advanced communications and computer technology with an unmatched understanding of how markets work
Getting In Front of a "Real Time" Revolution
Ashton Technology Group was founded by Fred Rittereiser, who was formerly President and Chief Operating Officer of Instinet - one of the most successful electronic trading systems in existence. Rittereiser and his partners took Instinet from a small company to a powerhouse that Reuters purchased in 1987 for $140 million. Now Rittereiser is using that experience to create a state-of-the art electronic trading and distribution system to expand the horizons of the financial services industry.
Ashton Technology Group, through its four subsidiaries, is developing a family of advanced online trading systems that includes:
• content products that execute trades in a highly secure, efficient, cost effective and anonymous online trading environment;
• research products for electronic investors developed by one of the leading experts on web-based financial services, Julio Gomez; and
• worldwide electronic distribution channels for the Company's financial products and services.
Building A Global Cybermarket
As part of its marketing strategy, the Company recently formed a strategic alliance with the network services group of communications giant CompuServe. Together, they will offer online access that will allow investors in 115 countries to log onto the Company's Universal Trading System and the Electronic Market Center using a local phone number and execute trades in 3 seconds. Another strategic alliance with E.COM International, Inc. will allow investors to access the Company's Universal Trading System through hand-held wireless devices from remote locations. These developments add up to unparalleled investor access to a trusted, secure system that guarantees buyers and sellers - of large blocks of securities in particular - the total anonymity that is required to eliminate market impact.
The Seven-Layered Onion
Another technological asset giving Ashton a significant advantage over competing systems is its "Seven Layered Onion" approach to encryption security. Unlike other online electronic trading services that graft encryption systems onto already established networks, Ashton incorporated military-style encryption technology into its network from the ground-up. It provides seven layers of security protection - like an onion whose layers can be peeled away only to reveal more of the same - for electronic transactions, guaranteeing a system that is "always up and totally secure."
Security guru and Executive Vice President for Systems and Advanced Technology at Ashton, Fred Weingard, regards every point where systems intersect as a possible network failure point, and has analyzed, tested and protected each of these intersections against outsider or insider intrusion. This level of online security is in compliance with defense department specifications. Compromise of such systems, management believes, is virtually impossible. This will allow institutions to transmit large orders from anywhere on the globe with total end-to-end security, either through the established telecommunications infrastructure or the Internet.
Pitting The Screen Against The Floor
The Company's systems were planned to coincide with the electronic revolution that is beginning to transform the securities trading industry. Business Week reports that many traditional stock exchanges in the US are already shutting down, curtailing or adapting traditional floor-based trading techniques in order to transition to some form of screen-based cybermarket. NASDAQ plans to put its trading network on the Internet. Chicago futures exchanges are planning to close their trading pits. And the New York Stock Exchange is exploring setting up cyber links with exchanges in Canada and Latin America, as is NASDAQ with Frankfurt and London.
Government financial services regulators at the Securities and Exchange Commission are welcoming this new era of cyber innovation. As long as the new electronic exchanges incorporate strong investor protections, SEC Chairman Levitt says his philosophy is to "get out of the way" of the coming cybermarket revolution, Business Week reports.
As a result, experts predict that the value of assets available for trading online will reach more than $600 billion by the year 2002.
A Rapidly Growing Market For Markets
Fred Rittereiser envisioned the need for a more secure, more accurate, fairer and truly universal electronic trading system years ago. He was one of the first to see that old-style exchanges - based on traders in close contact with each other - would eventually give way to the greater efficiency, anonymity and cost savings of electronic exchanges run by machines.
Increasingly, traditional exchanges - that are predominantly non-profit membership organizations administered by a governing board - are being challenged by electronic trading systems run like businesses and designed to make a profit. Management notes that, as a result, a wave of mergers is sweeping the stock exchange industry, and a "market for markets" is developing in which exchanges will vie for market share with each other. One of the ways exchanges can differentiate themselves from competitors will be the array of trading systems they offer. Ashton Technology is in the forefront of this trend - building premier electronic trading systems that management believes will offer the professional investment community unmatched security, innovation, flexibility and accessibility for online trades.
Fred Rittereiser has always been in the forefront of financial services innovation - as an early practitioner of electronic trading in 1972 - or representing the National Association of Securities Dealers (NASD) in negotiations that led to the creation of the Intermarket Trading System. Investors looking for a pathway to 21st Century cybermarkets may want to follow his lead and investigate the innovative securities trading systems that Ashton Technology Group is constructing.
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