Over the next 12 to 18 months, electronic communications networks (ECNs) should make significant inroads in the listed equities arena. At least, that's the opinion of a group of ECN officials who spoke at a recent securities industry trade show.
Executives from Bloomberg Tradebook, NexTrade, Archipelago and Tradescape.com, speaking on a panel entitled "The Future of ECNs in an Evolving Market Structure," all said that listed stocks represent the largest potential growth area for ECNs. Thanks in large part to the New York Stock Exchange's abolition of its anti-competitive Rule 390, these executives said, there is now much greater opportunity for ECNs to build market share in listed stocks.
Omar Amanat, chief executive officer of Tradescape.com (which owns the MarketXT ECN), said that the listed market is going to be a "wide open field" over the next year-and-a-half. "You will see an enormous range of players--not just ECNs--come in and try to tackle this marketplace," Amanat prognosticated. "Other exchanges will try to do joint ventures with ECNs, and we will see other combinations of player that we right now couldn't even fathom"
To date, of course, ECNs have carved an excellent niche in the Nasdaq market, but have struggled to gain a foothold in the listed equities realm. However, now that the barrier of 390 has been lifted, a door for trading listed stocks has been opened, said NexTrade president John Schaible. "ECNs will take advantage of listed stocks and the National Market System and become a real force, " Schaible prognosticated.
Meanwhile, Kim Bang, president of Bloomberg Tradebook, described the listed market as "the next frontier" for ECNs. Bang said that the ECN march into listed equities has been fueled not only by the abolition of 390, but by the "technology and routing inefficiencies" that exist in the NYSE market today.
Eventually, said Bang, Tradebook wants to provide its clients with the ability to get their quotes represented in the Consolidated Quote System--the national quote system for listed stocks. "Our customers will then be able to drive the inside quote for a listed stock and we think that's a big deal," he said.