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February 16, 2007

Citi's LavaFlow to Launch with New Order Types

By Nina Mehta

LavaFlow, Citigroup's long-awaited new electronic communications network, is set to launch this month, according to officials at Lava Trading, a Citi subsidiary.

The ECN, which is expected to benefit from Citi's prodigious order flow, was built up from the skeleton of OnTrade ECN, which the bank acquired in early 2006 from NexTrade Holdings.

The ECN was renamed after it was transferred from Citi to Lava last year. In addition to being an ECN aggregator, Lava now also manages a market center.

OnTrade was gutted and rebuilt, according to Lava executives. LavaFlow will offer a range of order types and the ability to route out to other markets.

The platform will include hidden, mid-point peg and intermarket sweep orders. LavaFlow will trade all National Market System stocks.

OnTrade was operational over the last year, but its executed volume was negligible. It sat out the ECN race in the latter half of 2006 as BATS and DirectEdge increased their market share with aggressive fee cuts and rebates.

Executives at Citi would not discuss how much of Citi's order flow would be posted on the new service, but sources expect it to be considerable. By way of comparison, Knight Capital Group, which operates DirectEdge, contributes one-third of the liquidity posted on that ECN.