Harborside+, a hybrid block crossing system for buy- and sell-side firms, halted its trading operations on Friday, a spokesman for the company confirms.
On Friday, Harborside+ sent an e-mail to clients notifying them that it would cease trading operations at the end of the trading day.
There are rumors circulating in the market that the company was having cash flow problems and was seeking a buyer. The company also is undergoing an examination by the Securities and Exchange Commission.
A call to Michael Cashel, president and chief executive officer of Harborside+, was referred to a company spokesman who says the company declines to comment at this time because the SEC examination is still under way. But the spokesman indicates that there are broader reasons for its decision, citing market structure changes that are expected to result from Reg NMS that could impact the future of block trading.
Harborside+ mainly competed against Liquidnet, an anonymous crossing network for block trades; POSIT, operated by Investment Technology Group; and Pipeline ATS (Alternative Trading System), a new block trading system.
"Harborside+ couldn't compete. It got crowded out by the big two -- POSIT and Liquidnet," says Robert Iati, partner at The Tabb Group. "Liquidnet's rise has made everyone other than Posit to pick up the rear," he says, adding that "Liquidnet has gained so much market share that many others could not afford to continue on the slow road. If you look at the space, you realize that Liquidnet is taking over the space," says Iati.
According to a recent Tabb Group study that estimates the market share of the crossing network business, Liquidnet has 47 percent, POSIT has 35 percent, Instinet has 10 percent, Harborside+ had 6 percent and Pipeline has 2 percent.
Launched in 2002, Harborside+ described itself as a confidential block trading network that blends an electronic matching system with human intervention. By contrast, Liquidnet operates like a peer-to-peer network that scans buy-side order management systems and sends an instant message when there's a match.
With Harborside+, brokers sent in indications of interest into a matching system that linked into buy-side order management systems. But when the system found a match, a notification was sent to Harborside+'s agency desk, where a trader contacted each counterparty to begin the negotiation with the contra side. On average, the company said there was $4 billion in liquidity available and the average trade size was 66,356 shares. However, the company did not disclose the amount of share volume it traded or the names of stocks.
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