Jerry Putnam, who has been itching to attack that stronghold since he launched the Archipelago electronic communications network in 1996, believes that the time is finally ripe -- and he’s building a war chest. Last month the company obtained a $125 million minority investment from high-tech private equity firm General Atlantic Partners, which placed one of its partners, Bill Ford, on the 12-member board of Archipelago Holdings. And on December 1, Archipelago announced its intention to do an IPO sometime in 2004.
The General Atlantic investment marks Archipelago’s first infusion since 1999, when several major financial institutions -- including American Century Investments, Goldman Sachs and E*Trade Group -- injected $190 million into the Chicago-based ECN, which is now a full-fledged exchange known as ArcaEx. Archipelago used the money to buy the Pacific Stock Exchange in 2000 and Redibook ECN in 2002 and to establish a London foothold, Archipelago Europe, in 2001. According to Boston-based research firm Celent Communications, ArcaEx today handles about a quarter of Nasdaq trades, slightly below the combined market share of Instinet Group and Island ECN, which merged last year. But ArcaEx owns a meager 4 percent of the listed market, handling about 260 stocks. “We haven’t really marketed yet to listed issuers,” says CEO Putnam. “We’ll ramp up aggressively in 2004 in sales and advertising. It boggles my mind that the NYSE can have so many unhappy customers and maintain an 80 percent market share.”
Does ArcaEx have a prayer? “The NYSE is a powerful brand,” acknowledges Ed Nicoll, CEO of In-stinet, another ArcaEx investor. “It has a governance problem. It’s not toast, but for the first time, it’s vulnerable.”
