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Spoofing, Surveillance and Supervision

Jay Biondo, Product Manager - Surveillance at Trading Technologies, co-authored an article along with James Lundy and Nicholas Wendland, both of Drinker Biddle & Reath LLP, reviewing the CFTC's regulations and expanding efforts, 21st century surveillance and supervision, as well as strategic recommendations.

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March 1, 2003

Reuters Ready to Jettison Instinet?

By Staff Reports

The news is getting worse for Instinet.

Once an untouchable king in Nasdaq agency transactions, the ECN is facing more tough times following a recent period of cutbacks and reorganization.

Reuters Group, which lost $630.4 million last year, may even consider an offer for its 62 percent stake in Instinet, according to some analysts.

That comes as Instinet deals with a reported loss of $111 million, or 34 cents a share, in the fourth quarter. The number accounts for Instinet's purchase of the Island ECN. It works out at $10 million, or three cents a share. That's excluding one-time charges.

Instinet and Island combined execute more Nasdaq trades than other individual ECNs. But some of the early economies of the business model have turned negative.

Island, for instance, had a market data revenue sharing program with the Cincinnati - which was an obvious plus for Instinet - stymied by the SEC. Instinet's next move is crucial. Previously, it responded in a slash and burn manner. It reduced fees, for example, to take back lost business. The next move will be brutal, because Reuters is likely to make big cuts in headcount at Instinet, analysts say. The British news conglomerate says it will eliminate about 3,000 of Reuters 16,000 employees around the globe this year.