New York, NY - 04/18/05- In the growing trend of industry consolidation, Nasdaq is in exclusive talks with Instinet to purchase the entire company for about $2.5 billion. Instinet has been on the block since November of last year and has resisted splitting up its two main planks of its business. Instinet has an electronic trading network and an institutional brokerage business. There are currently three main alternatives for electronic trading Nasdaq, Instinet and ArcaEx. A deal between Nasdaq and Instinet would put increasing pressure on AcraEx to find a suitor or expand. It is not clear what Nasdaq would do with the institutional brokerage business of Instinet, but the likely view it as a cost of aquiring the electronic business of Institnet. Rack it up to “good will” on the balance sheet.
The NYSE would also feel the pinch. The NYSE has been moving towards creating a hybrid electronic and floor trading components to its business model. As is generally the case when M&A heats up, rules changes by the SEC (Reg NMS) is probably underpinning the Nasdaq – Instinet deal, since the rule of best price favors electronic systems over floor trading systems.
The expectation for the industry is for further consolidation, not just for the trading and execution business, but for the equity research industry as well. Here again SEC rules changes are at the heart of the motivation to merge or aquire.
Posted at 07:28 am by Thomas Hutchinson
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