Track Securities Corp., a Boca Raton, Fla.-based broker/ dealer, has filed an application with the Securities and Exchange Commission and the National Association of Securities Dealers (NASD) to form an individual investor oriented electronic communications network (ECN). At the same time, Track Securities is expected to be acquired by Track Data Corp. - a real-time market data and trading software supplier - next year.
Track Data director Jack Spiegelman currently owns Track Securities, which pays a licensing fee to use Track Data's myTrack online trading software. But Barry Hertz, president and CEO of Track Data, says that his company plans to purchase Track Securities "before the end of second quarter" of next year. Such an acquisition, of course, would give Track Data control of the ECN, which will be registered as a broker/dealer and will operate from 8 a.m. to 8 p.m. EST.
The yet-to-be-named ECN - which will initially match buy and sell orders exclusively for Nasdaq stocks - will probably be jointly owned by Track Data and a group of minority investors. Noting that one of the reasons he wanted to launch an ECN is because such an entity would give Track the "ability to negotiate various alliances," Hertz says Track is "looking to share equity" in its trading network with Nasdaq market makers and Wall Street brokerage houses.
Besides selling off pieces of its ECN, Track is planning to build electronic linkages that will interconnect its network with online discount brokerage firms and rival ECNs. Hertz declines to specify which online discount brokers and ECNs Track has targeted for connectivity, but says that some ECNs have already contacted him to discuss network-to-network interfaces.
Track's ECN could also provide another execution destination for clients of myTrack. myTrack already has an electronic link to Datek Online Holding Corp.'s Island ECN, the largest individual-investor-targeted ECN. Moreover, Track Data is presently building myTrack interfaces to Brut - an ECN that recently signed a letter of intent to merge with rival Strike Technologies (ETW, 11/1/99) - and MarketXT - an after-hours equities trading system. The interface to MarketXT, Hertz says, will allow customers of myTrack to trade Nasdaq and NYSE stocks between 4:30 p.m. and 8 p.m. EST.
In addition to the execution destination and alliance factors, the cost of constructing an ECN also appealed to Track. "The cost of entry was extremely low," Hertz says. "We don't have to go out and hire any consultants. We have the infrastructure in place to build an ECN right now...and we have the bandwidth to do it."
While the Track ECN will at first be targeted at individual investors trading Nasdaq stocks, Hertz says the network will eventually pursue institutional investors and cover listed stocks. The SEC, he says, has informed Track that it will take around six months for its ECN to gain regulatory approval.