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ESpeed eyes equities

Treasuries brokerage Cantor Fitzgerald lost two thirds of its 1,050 employees in the September 11 attacks on the World Trade Center.

But the firm's technology proved indestructible, and despite a depleted sales force, Cantor's publicly traded ESpeed spin-off extended its electronic trading platform into international government securities, commodities markets and, earlier this year, foreign exchange. Now ESpeed is shifting into a higher gear.

Howard Lutnick, CEO of both Cantor and ESpeed, revealed in a November 12 earnings call that ESpeed would begin handling mortgage-backed securities and interest rate swaps by this month. No surprise there; Lutnick had been telegraphing those plans for a while. But he dropped a bombshell on unsuspecting analysts and institutional traders: ESpeed is also entering the equities markets, offering liquidity-seeking and price-improvement tools that will compete with Instinet Group and other e-trading venues.

"The field is already crowded," notes Larry Tabb, president and CEO of capital markets technology consultancy Tabb Group. "Can ESpeed's order-matching and block-trading capabilities be that much better than others'?"

Lutnick believes that what distinguishes ESpeed is its "leveraged model" -- the ability to layer one more asset class on "a built-and-paid-for matching engine and network connecting to most large banks and investment banks." As ESpeed, which has 700 client institutions, takes on other high-tech trading shops, like Charles Schwab Capital Markets and Investment Technology Group, "our incremental costs to enter the market are minimal," Lutnick asserts. "We can become the low-cost provider."