Instinet

Last updated
Instinet Incorporated
Industry Brokerage
Founded1969;54 years ago (1969)
FoundersJerome M. Pustilnik and Herbert R. Behrens
Headquarters 309 W 49th Street,
Manhattan, New York City, New York
,
U.S.
Area served
Worldwide
Key people
Ralston Roberts
(Chief Executive Officer)
Laure Richmond
(Chief Financial Officer)
Minor Huffman
(Chief Technology Officer)
Faron Webb
(General Counsel)
Richard Parsons
(CEO, Instinet Europe Limited)
Stuart Knowling
(CEO, Instinet Asia-Pacific)
Parent Nomura Holdings
Website http://www.instinet.com

Instinet Incorporated is an institutional, agency-model broker that also serves as the independent equity trading arm of its parent, Nomura Group. It executes trades for asset management firms, hedge funds, insurance companies, mutual funds and pension funds. Headquartered in New York City, the company provides sales trading services and trading technologies such as the Newport EMS, algorithms, trade cost analytics, commission management, independent research and dark pools.

Contents

However, Instinet is best known for being the first off-exchange trading alternatives, with its "green screen" terminals prevalent in the 1980s and 1990s, and as the founder of electronic communication networks, Chi-X Europe and Chi-X Global.

According to industry research group Markit, in 2015 Instinet was the 3rd-largest cash equities broker in Europe. [1]

History

Early history

Instinet was founded by Jerome M. Pustilnik and Herbert R. Behrens and was incorporated in 1969 as Institutional Networks Corp. The founders aimed to compete with the New York Stock Exchange by means of computer links between major institutions, such as banks, mutual funds, and insurance companies, with no delays or intervening specialists. [2] Through the Instinet system, which went live in December 1969, the company provided computer services and a communications network for the automated buying and selling of equity securities on an anonymous, confidential basis.

Uptake of the platform was slow through the 1970s, and in 1983 Instinet turned to William A. "Bill" Lupien, a former Pacific Stock Exchange specialist, to run the company. Bill Lupien decided to market the system more aggressively to the broker community, rather than focus exclusively on the buyside as his predecessors had. To expand its market, Lupien brought on board Fredric W. Rittereiser, formerly of Troster Singer and the Sherwood Group, as president and Chief Operating Officer [3] and David N. Rosensaft as Vice President (later SVP) of New Products Development. [4] [5] Together, they successfully introduced many innovations which made Instinet an integral tool for traders on both the "buy" and "sell" sides of the market.

Reuters acquisition

Instinet old logo.svg
Logo of Instinet under ownership of Reuters

As a result of Lupien's refocusing of Instinet (which the business was renamed in 1985), the firm grew rapidly in the mid-1980s. During the Crash of 1987 electronic trading system allowed trading when brokers and market makers were unwilling to answer their phones during the free-fall.[ citation needed ] Reuters, which in 1985 had acquired a portion of the firm, acquired the entire business in May 1987, though under the deal Instinet would remain an independent, New York-based subsidiary. Lupien and then COO Murray Finebaum would resign shortly thereafter. [6]

Alternative Trading Systems regulations

Under Reuters, the Instinet platform continued to grow through the late 1980s and into the early 1990s. By the time that the U.S. Securities and Exchange Commission introduced the Order Handling Rules and alternative trading systems (ATS) regulation in the late 1990s. In 1992, Instinet expanded internationally. Douglas Atkin led the effort and by 1998 Instinet was operating in over 20 world markets and had grown revenues to approximately $100 million. [7] Instinet was the dominant electronic communication network. However, these rules also gave rise to new competitors, some of whom employed new pricing schemes. By the early 2000s, these competitors, helped by missteps at Instinet that included rapid expansion, over-spending and slow uptake of technology, had managed to erode the firm's market share. [8] As a result, Instinet in 2002 merged with the Island ECN, renaming the Island technology platform Inet. [9]

Public listing

Reuters went on to IPO Instinet in 2001 [10] keeping a 62% ownership stake. It would hold this until the 2005 acquisition of Instinet by NASDAQ in 2005, in which Nasdaq retained the INET ECN and subsequently sold the agency brokerage business to Silver Lake Partners. [11]

Nomura Acquisition

In February 2007, Nomura purchased the firm from Silver Lake for a reported $1.2 billion. [12] Instinet is today operated as an independent subsidiary of Nomura and run by CEO Ralston Roberts. In December 2009, in commemoration of its 40th anniversary, Instinet worked with the Make-a-Wish Foundation to grant wishes to 40 children with life-threatening illnesses. [13] In May 2012, Nomura announced that it would transfer electronic trading in the United States to Instinet, with the goal of eventually making it the electronic trading arm for all of Nomura. [14] However, in September 2012, Nomura announced that it would instead make Instinet its execution services (cash, program and electronic trading) arm in all markets globally excluding Japan. [15]

Achievements

Instinet is credited [16] with several firsts in electronic trading. [17] In addition to launching one of the first electronic trading platforms in 1969, Instinet developed:

Related Research Articles

<span class="mw-page-title-main">Nasdaq</span> American stock exchange

The Nasdaq Stock Market is an American stock exchange based in New York City. It is the most active stock trading venue in the US by volume, and ranked second on the list of stock exchanges by market capitalization of shares traded, behind the New York Stock Exchange. The exchange platform is owned by Nasdaq, Inc., which also owns the Nasdaq Nordic stock market network and several U.S.-based stock and options exchanges.

<span class="mw-page-title-main">Day trading</span> Buying and selling financial instruments within the same trading day

Day trading is a form of speculation in securities in which a trader buys and sells a financial instrument within the same trading day, so that all positions are closed before the market closes for the trading day to avoid unmanageable risks and negative price gaps between one day's close and the next day's price at the open. Traders who trade in this capacity are generally classified as speculators. Day trading contrasts with the long-term trades underlying buy-and-hold and value investing strategies. Day trading may require fast trade execution, sometimes as fast as milli-seconds in scalping, therefore direct-access day trading software is often needed.

<span class="mw-page-title-main">Securities Exchange Act of 1934</span> 1934 U.S. legislation establishing rules and regulatory bodies for financial markets

The Securities Exchange Act of 1934 is a law governing the secondary trading of securities in the United States of America. A landmark of wide-ranging legislation, the Act of '34 and related statutes form the basis of regulation of the financial markets and their participants in the United States. The 1934 Act also established the Securities and Exchange Commission (SEC), the agency primarily responsible for enforcement of United States federal securities law.

An electronic communication network (ECN) is a type of computerized forum or network that facilitates the trading of financial products outside traditional stock exchanges. An ECN is generally an electronic system that widely disseminates orders entered by market makers to third parties and permits the orders to be executed against in whole or in part. The primary products that are traded on ECNs are stocks and currencies. ECNs are generally passive computer-driven networks that internally match limit orders and charge a very small per share transaction fee.

<span class="mw-page-title-main">Intercontinental Exchange</span> American exchange and clearing house company

Intercontinental Exchange, Inc. (ICE) is an American company formed in 2000 that operates global financial exchanges and clearing houses and provides mortgage technology, data and listing services. Listed on the Fortune 500, S&P 500, and Russell 1000, the company owns exchanges for financial and commodity markets, and operates 12 regulated exchanges and marketplaces. This includes ICE futures exchanges in the United States, Canada and Europe, the Liffe futures exchanges in Europe, the New York Stock Exchange, equity options exchanges and OTC energy, credit and equity markets.

Direct market access (DMA) is a term used in financial markets to describe electronic trading facilities that give investors wishing to trade in financial instruments a way to interact with the order book of an exchange. Normally, trading on the order book is restricted to broker-dealers and market making firms that are members of the exchange. Using DMA, investment companies and other private traders use the information technology infrastructure of sell side firms such as investment banks and the market access that those firms possess, but control the way a trading transaction is managed themselves rather than passing the order over to the broker's own in-house traders for execution. Today, DMA is often combined with algorithmic trading giving access to many different trading strategies. Certain forms of DMA, most notably "sponsored access", have raised substantial regulatory concerns because of the possibility of a malfunction by an investor to cause widespread market disruption.

Inet was an electronic trading platform based on a system developed by Instinet in the 1970s that merged with Island ECN in 2002 and was subsequently acquired by NASDAQ in 2005.

In finance, a dark pool is a private forum for trading securities, derivatives, and other financial instruments. Liquidity on these markets is called dark pool liquidity. The bulk of dark pool trades represent large trades by financial institutions that are offered away from public exchanges like the New York Stock Exchange and the NASDAQ, so that such trades remain confidential and outside the purview of the general investing public. The fragmentation of electronic trading platforms has allowed dark pools to be created, and they are normally accessed through crossing networks or directly among market participants via private contractual arrangements. Generally, dark pools are not available to the public, but in some cases, they may be accessed indirectly by retail investors and traders via retail brokers.

BATS Chi-X Europe is a London-based, order-driven pan-European equity exchange that has been a subsidiary of BATS Global Markets since 2011. It is a low latency, low cost alternative to exchange traded equities and exchange-traded funds (ETFs) that are listed on primary exchanges such as the London Stock Exchange, Frankfurt Stock Exchange, Euronext and OMX.

Markit was a British financial information and services company with over 4,000 employees, founded in 2003 as an independent source of credit derivative pricing. The company provides independent data, trade processing of derivatives, foreign exchange and loans, customised technology platforms and managed services. The company aims to enhance transparency, reduce financial risk and improve operational efficiency. Its client base includes institutional participants in the financial marketplace. On 12 July 2016, Markit and IHS Inc. merged in an all-stock merger of equals to form IHS Markit. IHS Markit later merged with S&P Global on 28 February 2022.

A multilateral trading facility (MTF) is a European Union regulatory term for a self-regulated financial trading venue. These are alternatives to the traditional stock exchanges where a market is made in securities, typically using electronic systems. The concept was introduced within the Markets in Financial Instruments Directive (MiFID), a European Directive designed to harmonise retail investors protection and allow investment firms to provide services throughout the EU.

Data Explorers is a privately owned financial data and software company headquartered in London, UK, with offices in New York, US, Edinburgh and Hong Kong. The company provides financial benchmarking information to the Securities lending Industry and short-side intelligence to the Investment Management community. The company has a global dataset covering $12 trillion of securities in the lending programs of over 20,000 institutional funds.

<span class="mw-page-title-main">Electronic trading platform</span> Software for trading financial products

In finance, an electronic trading platform also known as an online trading platform, is a computer software program that can be used to place orders for financial products over a network with a financial intermediary. Various financial products can be traded by the trading platform, over a communication network with a financial intermediary or directly between the participants or members of the trading platform. This includes products such as stocks, bonds, currencies, commodities, derivatives and others, with a financial intermediary such as brokers, market makers, Investment banks or stock exchanges. Such platforms allow electronic trading to be carried out by users from any location and are in contrast to traditional floor trading using open outcry and telephone-based trading. Sometimes the term trading platform is also used in reference to the trading software alone.

<span class="mw-page-title-main">BATS Global Markets</span> Global stock exchange

BATS Global Markets is a global stock exchange operator founded in Lenexa, Kansas, with additional offices in London, New York, Chicago, and Singapore. BATS was founded in June 2005, became operator of a licensed U.S. stock exchange in 2008 and opened its pan-European stock market in October 2008. As of February 2016, it operated four U.S. stock exchanges, two U.S. equity options exchanges, the pan-European stock market, and a global market for the trading of foreign exchange products. BATS was acquired by Cboe Global Markets in 2017.

High-frequency trading (HFT) is a type of algorithmic trading in finance characterized by high speeds, high turnover rates, and high order-to-trade ratios that leverages high-frequency financial data and electronic trading tools. While there is no single definition of HFT, among its key attributes are highly sophisticated algorithms, co-location, and very short-term investment horizons in trading securities. HFT uses proprietary trading strategies carried out by computers to move in and out of positions in seconds or fractions of a second.

<span class="mw-page-title-main">Matchbook FX</span>

Matchbook FX was an internet-based electronic communication network for trading currency online in the Spot-FX or foreign exchange market. It operated between 1999 and 2002.

Island ECN was one of the first electronic communication networks established for the trading equities in the United States. Founded in 1996 by Datek Securities veterans Jeff Citron and Joshua Levine, Island executed its first trades in 1997.

<span class="mw-page-title-main">Global Electronic Trading Company</span> American algorithmic trading firm

The Global Electronic Trading Company (GETCO), or Getco LLC, is an American proprietary algorithmic trading and electronic market making firm based in Chicago, Illinois. In December 2012, the firm agreed to acquire Knight Capital Group; this merger was completed in July 2013, forming the new company KCG Holdings.

Bloomberg Tradebook, LLC., the agency broker of Bloomberg L.P., serves global investment advisors, money managers, hedge funds, proprietary desks and broker dealers, with access to global trading venues, proprietary trading algorithms, execution consulting services, pre-and-post trade analytics and independent research. Through a trading platform integrated with the Bloomberg Professional service, Bloomberg Tradebook provides its customers with direct market access to more than 110 markets and global trading solutions for equities, futures, and options across 44 countries, as well as 43 currency pairs. Tradebook offers over 55 proprietary algorithms designed for each asset class and market.

<span class="mw-page-title-main">Bill Lupien</span> American businessman (1941–2021)

William A. Lupien was an American business executive in the financial industry. He traded actively in the financial markets throughout his career. He was a Specialist and later Exchange Governor on the Pacific Stock Exchange (PSE), a Nasdaq market maker, the Chairman and CEO of Instinet, the Chairman and CEO of OptiMark Corporation, and the Managing Director of the General Partner of a hedge fund, Kudu Partners LP. He helped develop the world's first electronic trading system. He also served on the Advisory Committee on the National Market System. In 1999 he was featured in a CNBC television series as one of five people who had changed the course of the securities industry in the 20th century.

References

  1. ↑ "2015 H1 European Cash Equity and ETF Broker Rankings" (PDF). Markit Group Limited. Retrieved 11 November 2014.
  2. ↑ "Computer Net to Eliminate Broker Commissions Eyed". March 1969. Retrieved 2010-09-08.
  3. ↑ "Fredric Rittereiser - Founder and Chairman".
  4. ↑ Ivy Schmerkin (June 1990). "Personalities". Wall Street Computer Review.{{cite journal}}: Cite journal requires |journal= (help)
  5. ↑ "Transvik: Black Box Exchange Feels Like the Real Thing". 1 (12). Trading Systems Technology. December 7, 1987.{{cite journal}}: Cite journal requires |journal= (help)
  6. ↑ "Reuters Announces Resignations at Instinet". December 1987. Retrieved 2010-09-08.[ dead link ]
  7. ↑ "Instinet Corporation | Encyclopedia.com".
  8. ↑ "Back From the Brink". December 2002. Archived from the original on 2011-02-25. Retrieved 2010-09-08.
  9. ↑ Erin Joyce (June 10, 2002). "Instinet Acquires Island ECN". internetnews.com.
  10. ↑ Lewis, Mark (April 2001). "Reuters Gambles with Instinet IPO". Forbes. Retrieved 2010-09-08.
  11. ↑ "NASDAQ Completes Acquisition of INET". December 2005. Retrieved 2010-09-08.
  12. ↑ "Nomura to Buy Instinet". November 2006. Retrieved 2010-09-08.
  13. ↑ "Instinet: 40 Years and Counting". Instinet. December 2009. Archived from the original on 2013-01-26. Retrieved 2010-09-08.
  14. ↑ Himaras, Eleni (15 May 2012). "Nomura Will Transfer Electronic Trading In U.S. To Instinet Unit". Bloomberg. Retrieved 18 July 2012.
  15. ↑ Price, Michelle (7 September 2012). "Nomura's Instinet Move is Overdue, But Makes Good Sense". Financial News.
  16. ↑ "Instinet Completes Purchase of BlockCross ATS from State Street | Instinet". www.instinet.com. Retrieved 2023-07-10.
  17. ↑ "Instinet Corporate Timeline" . Retrieved 2010-09-08.[ permanent dead link ]
  18. ↑ "Instinet Celebrates 20th Anniversary of Industry's First Crossing System" (PDF). December 2006. Retrieved 2010-09-08.[ permanent dead link ]
  19. ↑ "Nasdaq to buy Chi-X Canada to access Canadian equities market". Reuters. 2015-12-08. Retrieved 2021-07-20.
  20. ↑ "J.C. Flowers Buys Chi-X Trading Business in Australia, Japan". www.bloomberg.com. 2016-01-24. Retrieved 2021-07-20.
  21. ↑ "Instinet Completes Purchase of BlockCross ATS from State Street | Instinet". www.instinet.com. Retrieved 2023-07-10.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.