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To: TFF who wrote (6942)	4/11/1999 4:35:00 PM
From: TFF	Read Replies (2) \| Respond to of 12617

Island readies for exchange step:President talks Q1 volumes, future of ECNs By Emily Church, CBS MarketWatch Last Update: 7:28 PM ET Apr 10, 1999 Net Stocks Report NEW YORK (CBS.MW) -- Island -- an electronic communications network -- is gearing up to become a full-fledged stock exchange. Trading volumes at ECNs like Island, which competes with Reuters' (rtrsy: news, msgs) Instinet, have been growing rapidly and are now home to a significant volume of Nasdaq stocks. CBS.MarketWatch.com spoke with President Matthew Andresen about trading volumes in the first quarter and Island's plans, which could include a selling a stake to the public or bringing in large members. Island is a wholly-owned subsidiary of Datek Online Holdings. Datek's brokerage services contribute about 15 percent of Island's order flow. Online brokerage stocks have seen quite a runup on the expectation that trading volumes were huge in the first quarter. What kind of volume growth did you see at Island? Andresen: We've seen tremendous growth in the first quarter. Certainly we benefited from the explosion in interest the retail space and that includes the online space... Off the top of my head I can tell you that the dollar volume of shares traded went from $214 billion shares in fourth quarter of 1998 to $342 billion in the first quarter of 1999... In the fourth quarter of 1998 we executed about 4.6 billion shares and in the first quarter that was up to 5.5 billion shares. A lot of people are wondering whether there's going to be some consolidation among the ECNs. The idea is that you can't have an efficient market with ten or so 'black boxes' out there. Andresen: I think you are going to see consolidation of order flow. I'm not sure you are going to see consolidation of ECNs... If you wanted to sell a car you'd want to go to the place where the most other people were. You wouldn't go to Amish country, you'd probably want to go to my home town in New Jersey, where it seems everybody has seven cars. You have to go where everyone else is, so I agree that there's not room for 15 ECNs doing appreciable volume. However, I don't think you're going to see the consolidation in terms of ECNs scooping up other ECNs. I don't that think that's necessary. I think if you're a large network, you'll get that order flow anyway. Island is seeking to become an exchange. When might the change take place? Andresen: The rules that allow ECNs to choose to remain registered broker-dealers or to choose to become a self-regulated exchange reporting directly to the SEC take effect take effect April 21... We've had some preliminary meetings. We've made a couple key hires for our own infrastructure and of course, we've hired many lawyers. We're working very hard on a framework for this entity. We'll be working be very closely with the Commission starting on April 21. It's really in the Commission's hands, so I can't really comment how long that will be since we really are the guinea pig. We have a good track record, tremendous volume and we think we have an attractive filing, but it's up to the Commission to decide. What about trading in NYSE stocks? Andresen: The $64,000 question -- or probably much more. One of the main forces driving our exchange filing is to be able to trade Big Board stocks. Now, we are allowed to trade Big Board stocks; there's nothing stopping us from doing that and in fact Instinet does it right now, a not negligible amount of volume. But the key thing to note here is that if we did NYSE stocks it's without representation. And what about Island's future plans, about perhaps going public? Are their plans to break up Datek Holdings? Andresen: We always are investigating our financing options. Once you become an exchange, you will still be a Datek-owned exchange? That process won't change the relationship? Andresen: No. It will change, I believe. Those are details that will be worked out with our exchange filing... Those are details we'll keep those under our proprietary hats for now.