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Strategies & Market Trends : Trader J's Inner Circle -- Ignore unavailable to you. Want to Upgrade?

To: R L who wrote (14417)	5/11/1999 1:50:00 PM
From: snerd	Respond to of 56535

For those following brokerages or ecn's: Waterhouse to pay $25 mln for stake in Island ECN (Reuters 05/11 12:42:10) NEW YORK, May 11 (Reuters) - Island ECN Inc., which operates the second-largest electronic stock trading system in the United States, said on Tuesday it will get a $25 million investment from the third-largest U.S. Internet broker, Waterhouse Investor Services Inc. The investment will give Waterhouse, which is owned by Canada's Toronto-Dominion Bank <TD.TO>, a 12.5 percent stake in Island, a subsidiary of privately owned Internet brokerage Datek Online Holdings Inc. of Iselin, N.J. The deal, which is expected to close within the next two months, values New York-based Island at $200 million. Datek will retain an 87.5 percent stake in Island. Island operates an Electronic Communications Network (ECN), which matches stock orders from money managers and brokerage firms. The firm has the second largest ECN after Instinet, the broker owned by information and financial data group Reuters Group Plc. <RTR.L> <RTRSY.O>. "A strategic partner with the stature of Waterhouse gives us not only the capital but really the strategic (advantage) of (having) them as a source of liquidity down the road," Island's president, Matt Andresen, told Reuters in a telephone interview. "They are a very fast-growing company and really a dominant force in U.S. discount brokerage." Island will use the $25 million investment to beef up its infrastructure as it applies for regulatory approval to become a stock exchange and to start matching orders for stocks traded on the New York Stock Exchange. Island will file its application with the U.S. Securities and Exchange Commission in the next two months, Andresen said. He declined to say whether Waterhouse would start funneling customer orders through Island instead of continuing to send them to Nasdaq's largest market maker, Knight/Trimark Group Inc. <NITE.O>. Waterhouse holds a 9 percent stake in Knight/Trimark that is currently valued at $834 million. In response to a question, all Andresen would say was: "They bought into this because they believe in what we are doing and they believe in delivering value to their customers." A spokeswoman for Waterhouse, which plans to go public in a $1 billion-plus stock offering this summer, also declined comment, saying the firm was in the so-called "quiet period" preceding a stock offering. Executives of Knight/Trimark, which is partly owned by a slew of Internet brokerages, were not immediately available to comment. Knight/Trimark, which processes over 300,000 trades a day from mostly Internet brokerages, more than quadrupled its profits to $37.4 million in the first quarter. "If you look at the last six to nine months and break down the growth in various segments of the market place, you would (see) that the only segment that is growing faster than ECNs is Knight/Trimark," Knight/Trimark's chief executive, Kenneth Pasternak, told Reuters last month. Waterhouse processed some 57,800 trades a day in the first quarter, according to Piper Jaffray analyst Stephen Franco, and has a 11.7 percent market share of the U.S. online brokerage market. Only E*Trade Group Inc. <EGRP.O> and Charles Schwab Corp. <SCH.N> processed more cyber trades in the quarter. Datek's online brokerage is ranked No. 4 with 50,345 trades a day in the first quarter. Island matched about 250,000 orders a day in the first quarter, up more than four times from the year-ago period. It competes with such traditional market makers as Knight/Trimark and the Nasdaq electronic stock exchange. Island's parent, Datek Online, in January hired former Waterhouse president Edward Nicoll as president of its brokerage operation and in March promoted him to chief operating officer of the holding company. John Mullin, also a former Waterhouse executive, replaced Nicoll as the brokerage's president. ((--Jack Reerink/ Financial Services Desk (212) 859-1725--)) REUTERS