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Non-Tech : Knight/Trimark Group, Inc. -- Ignore unavailable to you. Want to Upgrade?

To: gbh who wrote (5479)	11/2/1999 6:09:00 PM
From: Gary Korn	Read Replies (1) \| Respond to of 10027

Gary, if you get a chance, please give me a little insight into the Optimark deal. Who is Optimark, and what do they do? Is this something like an institutional ECN, ala Instinet? Will NITE get payed for there order flow to Optimark? Gary, I posted a lot of the information about Optimark last night. Here is a (somewhat flawed) quick synopsis: 1. Optimark was created by the founder of Instinet (the INCA ECN). It is ECN-like, but one with a unique algorithm for handling order flow, particularly institutional order flow. Rather than requiring direct matches, it allows for a range of possible matches. Given the size of institutional orders, this can have signficant advantages. 2. Because Softbank recently injected $100MM into Optimark, you can bet that it is being readied for a future IPO. Other investors include Merrill and Goldman. 3. NASD has adopted Optimark for 10 stocks (the most liquid) and with plans for 250 stocks by year end (my guess delayed, unless NITE steps in quickly), as what I believe is a big part of its strategy to battle ECNs. NASD/Optimark could then become a super-ECN. 4. Per its most recent cc, NITE is the largest, or one of the largest, users of ECNs. It needs ECNs in order to slough off its inventory. NITE pays about $30MM t0 $40MM a quarter in liquidity fees to these entities. In return, NITE gets nothing: i.e., no equity interest. 5. Now, much like TWE, EGRP and AMTD did when they agreed at the outset to send order flow to NITE, in return for an equity stake, NITE is now going to use the NASD/Optimark super-ECN to slough off its inventory. And, like the OLBs, NITE will get paid with an equity stake. (I assume that NITE will pay liquidity fees to NASD/Optimark, but even if so, the big difference is that it will for the first time get a significant equity stake). 6. In addition to getting an equity stake (the largest equity stake) in a future IPO, one used by the NASD market itself to battle other ECNS, NITE's order flow propels the volume and liquidity of the NASD/Optimark system (liquidity definitely begets liquidity here), making it easier to run institutional size orders through that entity, in turn making it easier for NITE to recruit institutional order flow in the first place (for now it has a legitimate place to work the orders). It's kind of a leverage play, I think. Gary Korn