Electronic trading upstart Matt Andresen continues to make life miserable for the Nasdaq Stock Market. Five years ago the 31-year-old, glabrous-headed chief of Island helped lead the revolution that resulted in nearly half of Nasdaq’s volume moving to electronic communication networks. Now, just as Nasdaq is set to launch a new trading platform designed to win that volume back, Andresen is once more trying to outflank the traditional market.
Last month he helped engineer a merger between Island - the biggest ECN in terms of trading volume - and Instinet, which is No. 2. The deal may pose an even bigger threat to Nasdaq as a competitive force than the original emergence of ECNs. Here’s why: Nasdaq’s new system, SuperMontage, strives to centralize the trading interest that is now fragmented among several ECNs and scores of market-making firms and thus has the support of many big brokerage and asset management houses. But its success depends in large part upon the various ECNs agreeing to post their quotes on the system. Island was the first to sign on, in April. Now, however, angered by a sudden increase in fees, supposedly to cover regulatory costs, Island is poised to back out. Andresen could convince Instinet to stay on the sidelines as well. Combined, Island and Instinet account for approximately 25 percent of Nasdaq volume.
“We do next to nothing in any area that requires regulation by the NASD,” says Andresen. “We are a simple business - an open and transparent matching engine. I find it odd that we would have to bear such a disproportionate share of the burden of Nasdaq,s regulatory bill.” For now, Nasdaq may need Island,s quotes more than Island needs Nasdaq’s new system. Says Andresen, “We could always just leave SuperMontage.”
