10 June 2002 Instinet, the troubled electronic share-trading network 83%-owned by Reuters, is taking over rival Island ECN in a deal valued at $508 million (€538m). The takeover is subject to regulatory approval.
Fleet Street, London-based Reuters in its report today said that the merged entity will be “the largest alternative electronic trading network … second only to Nasdaq’s own electronic trading platform”. A combined Instinet/Island group will handle about a fifth of all shares traded on Nasdaq, the high-tech focused US stock exchange.
The transaction is an all-stock deal, with Island’s stockholders being given a 25% stake in Instinet. Reuters’ stake in Instinet will shrink to 62%. The Island acquisition comes ahead of the Nasdaq launch of a revamped version of its own trading software, called ‘SuperMontage’, which is intended to win stock traders back from independent share dealing platforms such as Instinet.
Reuters has been known for some time to be seeking a partner for Instinet, which was floated in May 2001. Instinet is the oldest electronic network of its kind and operates in 40 securities markets worldwide, including Tokyo, Frankfurt, Paris and London.
Island is typical of the electronic communications networks (ECNs) that sprang up during the Internet boom of the late 1990s. Furthermore, since the bear market inaugurated by the collapse of the dot-com boom, trading volumes have plunged, slashing the margins and profitability of ECNs, such as Island and Instinet.
Reuters pushes ahead with Instinet IPO plans (4 April 2001)