Knight/Trimark Shareholder E*Trade, Others May Sell, WSJ Says
Jersey City, New Jersey, Jan. 19 (Bloomberg) -- Knight/Trimark Group Inc.'s major shareholders, including E*Trade Group Inc., Ameritrade Holding Corp. and Toronto-Dominion Bank's Waterhouse Securities Inc., may sell their stock in the company, the Wall Street Journal reported. The 180-day period during which Knight/Trimark's 26 broker-owners are restricted from selling shares expired this month, and Deutsche Bank Securities analyst James Marks said he expects E*Trade and Ameritrade to sell all or a portion of their holdings. The sales could cut Knight/Trimark's business, as the brokerages lose their incentive to use the company to execute stock orders, the newspaper said.
The five largest customers of Jersey City, New Jersey-based Knight/Trimark, the largest market maker in Nasdaq securities, account for about one-third of all its orders.
2 points
first a few days ago I warned about the hype on cnbc others over Knights' lock on the market for Nasdaq. The company will go to all electronic system. The on line trades will all be done by ECN soon.
E*TRADE and Goldman Sachs Each to Buy 25 Percent Stake in EstablishedElectronic Communication Network (ECN)Archipelago
Investment Establishes E*TRADE's Place in Latest Trend in Technology-Enabled Trading; ECNs Now Account for 22 Percent of All Trades of Nasdaq Stocks; Yet Another Electronic Channel For Rapid, High Quality Order Routing and Execution
PALO ALTO, Calif., Jan. 7 /PRNewswire/ -- E*TRADE Group, Inc. (Nasdaq: EGRP) today announced that the company and international investment banking and securities firm, Goldman Sachs Group, L.P. ("Goldman Sachs"), have each agreed to acquire approximately 25 percent voting interest in Archipelago (Symbol: TNTO), the operator of an existing Electronic Communication Network (ECN) for Nasdaq stocks. Strengthening E*TRADE's leadership as an all-electronic provider of financial and investment services for online investors, the acquisition will further position it as a player in the market for technology-enabled ECNs.
Under the agreement, E*TRADE and Goldman Sachs, as well as the founding partners, Virago Enterprises, LLC and Townsend Analytics, Ltd., will each own approximately one-fourth of the voting interest in a new company, Archipelago Holdings, LLC. Created in 1997, Archipelago is one of 9 ECNs granted permission by the Securities and Exchange Commission (SEC) to allow purchase and sale transactions to be matched electronically outside the exchange trading system. Archipelago currently serves approximately 4,000 individual and institutional traders.
"Archipelago represents a strategic investment in leading-edge technology that will extend our leadership in the evolving electronic financial services market," noted Christos M. Cotsakos, Chief Executive Officer and Chairman-elect of E*TRADE. "Archipelago's trading system will provide E*TRADE with yet another opportunity to serve our customers who derive value from the speed, efficiency and anonymity associated with ECN-based trading, further leveraging our Stateless Architecture (SM) launched with our Destination E*TRADE Web site. Ultimately, Archipelago is another way to improve the quality of service by giving our broad base of customers more choices through which their securities orders can be executed."
"ECNs are playing a growing role in providing individual and institutional traders alike with fast, cost-effective access to financial markets, both during regular and after-hours trading," Cotsakos continued. "With E*TRADE and Goldman Sachs as partners in this enterprise, Archipelago has the opportunity to establish itself as the premier ECN serving both the retail and institutional markets."
Since the SEC passed regulatory changes to allow ECNs in 1996, ECNs have played a growing role in the equities trading market. ECNs currently account for some 22 percent of the share volume for Nasdaq stocks and almost 5 percent of orders in securities listed on the NYSE, according to the Securities and Exchange Commission (Release No. 34-40760). ECNs allow orders to be directly routed and displayed on the floor of an exchange or the Nasdaq Stock Market without the need for an intermediary, thus assuring order anonymity.
"ECNs are clearly a significant and growing segment of today's financial services market," said Duncan L. Niederauer, a managing director at Goldman Sachs. "Our investment in Archipelago demonstrates Goldman Sachs' continued commitment to provide our clients with the broadest array of liquidity services."
"By adding E*TRADE and Goldman Sachs as partners in Archipelago, we have created a new, more powerful force in the electronic financial services market," said Jerry Putnam, President of Virago Enterprises, LLC and one of the founders of Archipelago. "E*TRADE is a leading Internet financial services company and shares our vision of investor empowerment through technology."
Archipelago has an exclusive agreement with Townsend Analytics, Ltd., for use of Townsend's proprietary Book Server software, which enables ECN order matching and preferencing, for the purpose of trading U.S. equities and a nonexclusive agreement for purposes of trading other financial instruments. In addition, Archipelago has a licensing agreement with Townsend Analytics to distribute RealTick and RealTrade front-end software for active individual and institutional traders under the Archipelago label.
"The Archipelago trading system provides tremendous benefits to its users. We intend to aggressively market that value proposition in order to grow its ECN market share," said Cotsakos. "We want Archipelago, with backing from E*TRADE and Goldman Sachs, to win wide recognition as the ECN platform for reliable and trusted trade execution."
Based in Chicago, Archipelago LLC will be operated as a stand-alone company. Its current management and technology development team will remain in place and no personnel changes are planned.
The acquisition of an approximately 25 percent voting interest in Archipelago is another in a series of aggressive moves by E*TRADE intended to gain competitive advantage and critical mass in the global online investing market. In 1998, E*TRADE launched a major new financial hub Web site called Destination E*TRADE, initiated a $100 million marketing program to grow and diversify its customer base, and expanded its array of licensing agreements and joint ventures which now cover 32 countries around the world. As of September 30, 1998, E*TRADE had an asset base of $11.2 billion, approximately 550,000 accounts, and processed more than $1.7 billion in average weekly volume.
Jersey City, New Jersey, Jan. 14 (Bloomberg) -- Large market makers are causing delays for investors trying to make online trades because they periodically remove certain Internet stocks from automatic execution systems, industry executives said.
Knight/Trimark Group Inc., the biggest market maker on the Nasdaq Stock Market, yesterday removed about a dozen Internet stocks, including Yahoo Inc. and Amazon.com Inc., from its computerized execution system several times for about 15 minutes, said Ken Pasternak, president and chief executive. Trades were executed manually, taking three to four minutes instead of a few seconds.
''It involved substantially less than 10 percent of our volume, but it was the spotlight stocks at the spotlight times,'' Pasternak said. ''In those cases, we go to 'actual available liquidity' from 'guaranteed liquidity.'''
In the past month, other market makers, including Herzog Heine Geduld Inc. and Charles Schwab Corp.'s Mayer Schweitzer unit, have also moved to manual execution of some Internet stocks.
Jersey City, New Jersey-based Knight's volume rose to 270,000 trades daily over the five days through yesterday from about 200,000 in the first four sessions of 1999, Pasternak said. Customer delays, though, are ''less due to system problems than to stocks being removed from auto-execute,'' he said.
Online brokerages execute their customers' Nasdaq trades through market makers like Knight or electronic communications networks like Island ECN Inc., a subsidiary of Datek Online Holdings Corp. Such trades are bunched together and matched electronically, with final execution often coming through market makers' systems. Full automation of a trade, though, can cease at the buy or sell order's final destination, the trading desk of a market maker.
Point number 2) The delays in access and tradeing is affecting all brokers yesterday Waterhouse, Ameritrade, Schwab and EGRP all had problems getting the marketmakers to execute.
Online brokerages and their customers this week reported delays of as long as 15 minutes in getting trades executed in certain heavily traded Internet stocks.
Trader Signals
Knight has systems that signal its traders if it gets orders for more than 10,000 shares of a stock in a volatile market. If Knight receives a bundle of purchase orders for 100,000 shares of Yahoo assembled from groups of online brokers like E*Trade Group Inc. and Waterhouse Investor Services Inc., it will automatically execute only the first 10,000 shares.
''That's $4 million of risk capital I've injected,'' said Pasternak, because Yahoo traded at 400 earlier this week.
After executing the first 10,000 shares, Knight will try to balance the remaining 90,000 orders, though it won't guarantee to take shares for its own account. ''I'm not going to stand in there against waves of day traders,'' he said.
Day traders are a broad category that includes investment hobbyists as well as hardened professionals who trade in an out of stocks quickly, hoping to make quick profits on rapid swings in the prices of volatile stocks. Increasingly they are using discount online brokerages to execute their trades.
Waterhouse Investor Services, the third-largest online broker and a subsidiary of Toronto-Dominion Bank, said its fourth quarter online volume rose 55 percent to about 41,200 trades daily. Datek Online Brokerage Services Inc., another subsidiary of Iselin, New Jersey-based Datek Online Holdings and the No. 5 online broker, said volume more than doubled to about 42,000 trades daily, while E*Trade Group Inc., the No. 2 online broker, said volume rose 41 percent to about 43,000. Industrywide, volume rose more than 30 percent in the fourth quarter.
Volume Surge
The volume surge has accelerated since Jan. 1, with Datek averaging about 65,000 trades per day this week, and E*Trade reporting a company record $1 billion in trading activity Jan. 4.
Ed Nicoll, president of the Datek brokerage business and former president of Waterhouse, said his firm will rebate its $8 commission to customers when it can't execute their trade within 60 seconds -- provided those trades can be automatically executed by market makers like Knight. If not, there's no rebate, he said.
''At the opening there are some delays, but it's a function of the tremendous amount of orders in some Internet stocks,'' he said. The company had no system failures yesterday, and delays were attributable to market makers executing some trades ''by hand,'' he said.
''People have to understand that because of these market conditions they can't expect to get the same kind of executions they might normally get,'' he said. ''Investors need to understand the risks they're taking in these stocks.''
To clear a backlog of orders, Waterhouse shut down its Web site from 9:45 a.m. New York time to 10:45 a.m., said Frank Petrilli, president and chief operating officer. The company processed yesterday almost twice the average daily volume of online trades it executed in the fourth quarter, he said, and quadruple the year-ago level.
''We executed 120,00 total trades yesterday, so we did something right,'' said Petrilli, whose firm will honor its $12 online commission if Web customers are forced to use telephones or branch offices to make trades.
Waterhouse is working ''as we speak'' to expand a ''pipe'' that carries its trades between its Web servers and its processing service, Automatic Data Processing Inc. ''We hope the problem will be fixed by next week so we can handle 200,000 trades a day,'' he said.
Starting this week, Waterhouse has also blocked trading on its Web site of certain Internet stocks. The list changes daily, said spokeswoman Melissa Gitter, and today has 11 stocks including Yahoo, Amazon.com and Broadcast.com Inc.
''We held off as long as we could but we're doing this because of volatility, to protect ourselves and our customers,'' she said.
These delays will be dealt with as EGRP migrates its business to ECN
Regards,
Norden |
