Commentary

Richard Repetto
Traders Magazine Online News

Why Do Exchanges Own Multiple Licenses? It's Not Hard To See, Look at the SEC

In this recent research note, Sandler O'Neill + Partners, L.P. Principal Richard Repetto examines why the public exchange operators hold multiple licenses and that rationale behind this phenomenon.

Traders Poll

As Bitcoin turns 10 year old this month, why are you not trading it or other crypto currencies?

I am trading it/them.

19%

Too volatile

38%

Issues surrounding custody and clearing

35%

Not enough block liquidity

8%

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May 31, 1998

The ECN Playing Field:The Existing Players

By Staff Reports

Instinet: Owned by London's Reuters Group PLC, Instinet is one of the oldest and largest electronic communications network (ECNs). Founded in 1969, Instinet was acquired by Reuters in 1987, and now has offices in eight major financial centers worldwide. As a reigning champion, it is the target of every competing ECN, even though it has not seen any major impact on its business. The trading community complains that Instinet crashes often.

Fee: Up to 1.5 cents per share for brokers.

Market Share: 69 percent.

TradeBook: Owned by Bloomberg, the system is more than 15 months old. With 100,000 Bloomberg terminals in place, many thought it was the ultimate competitor for Instinet. However, it is still going through its early childhood. Still, a formidable competitor.

Fee: Up to 1.5 cents per share for brokers.

Market Share: Seven percent.

Island: Originally favored by electronic day-trading firms, it is one of the reasons Internet-based brokerage firm DatekOnline has faster access capability than its rivals. Not to be underrated.

Fee: $1 per trade execution.

Market Share: 20 percent.

Archipelago/Terra Nova: Used by options traders via handheld portable computers, though it is a minor player.

Fee: Up to three cents per share.

Market Share: Three percent.

Rating & Execution Dot Interface Book (RediBook): NYSE specialist firm Spear, Leeds & Kellogg's system, designed for institutions.

Fee: Not available.

Market Share: One percent.

Attain: Latest entry in the ECN market from electronic day-trading firm All-Tech Investment Group based in Montvale, N.J.

Fee: Up to 1.5 cents per share.

Market Share: Not available.

Coming Up Next

BRUT: The Brass Utility is developed by Automated Securities Clearance Corp., a Weehawken, N.J.-based company that makes Brass order-management and routing software, and Jersey City wholesaler Knight Securities (which has a minority interest).

Fee: Not available.

STRIKE: This ECN was developed by giant Bear, Stearns & Co. and a large consortium of Wall Street firms and technology companies. To debut later this summer, the system is seen as the next Goliath of the ECN world.

Fee: Not available.

Source: Traders Magazine research