SG Cowen Securities Corp., a broker/dealer unit of French investment bank Societe Generale, last week joined a group of minority investors that have purchased stakes in NYFIX Millennium - an alternative trading system (ATS) consortium that is majority-owned by Stamford, Conn.-based NYFIX. NYFIX, which primarily supplies FIX-based order-entry and order-routing software for listed stocks, has also sold stakes in NYFIX Millennium to Morgan Stanley Dean Witter, Lehman Brothers, Deutsche Bank, ING Barings, Sanford C. Bernstein & Co. and Warburg Dillon Read.
NYFIX Millennium, which is scheduled to launch in the second quarter of 2000, is being targeted at institutional and individual investors who want easy and quick access to best executions, says Peter Kilbinger Hansen, president and chief executive officer of NYFIX. The NYFIX ATS expects to attract institutional and retail order flow, he says, through electronic interfaces Millennium will have to online discount brokers and traditional broker/dealers.
Millennium will differentiate itself from all other electronic communications networks, Hansen says, via its connection with NYFIX - an order-routing system which currently routes more than 100 million shares a day on behalf of roughly 150 financial institutions. Hansen contends that NYFIX - which is widely deployed at the New York Stock Exchange - will immediately give Millennium a big edge over ECNs in the listed stocks arena.
More importantly, Hansen says, NYFIX contains an intelligent order-routing mechanism that searches for the best match for an order at a variety of execution destinations - including the primary markets, regional exchanges, third-market market makers and ECNs. "If Millennium can't price improve on the order, we will use statistical data from all of the best execution reporting agencies to route the... order flow to the destination where it will likely get price improved," he says.
One potential "price improvement" destination for orders is the National Market System. The NMS electronically links nine U.S. equity markets, including the NYSE and Nasdaq, through a network called the Intermarket Trading System. Via ITS, investors can search for the best available price for a particular stock on all the connected equity markets. And Hansen says that Millennium, through the NYFIX network, will not hesitate to send an order to the NMS. "Orders will get treated in transit for price improvement, and they will go to the best price destination. And the majority of the time, that destination will be the National Market System."