For most of his first year as CEO of the Nasdaq Stock Market, the former financial technology executive has been in retreat, shedding his predecessors’ bull market strategy, cutting costs and exiting money-losing overseas ventures. But last month he got more aggressive, slicing the Nasdaq’s trade execution fees to the lowest in the industry.
Now, with net income up by 77 percent in the first quarter over the previous year, Nasdaq has approached six-year-old electronic communications network Brut about a possible acquisition, sources say. The ECN, owned by SunGard Data Systems, has in the past year grown from an also-ran into a viable competitor that executes more than 12 percent of the volume in Nasdaq stocks. Greifeld, sources say, fretted that Brut might fall into the hands of a larger rival, Instinet Group, which is rumored to be interested in acquiring it. (Instinet declines comment.)
Greifeld, 47, launched Brut in 1998 while president of financial technology company Automated Securities Clearance. He wanted to create an ECN that would serve as a trade execution utility for the Nasdaq market makers who used ASC’s Brass order management system; he named it Brass Utility, or Brut for short.
Greifeld will not say whether Nasdaq is talking to Brut, but he acknowledges having conducted strategic discussions with competitors in the past. “This is a space where people talk to each other on a fairly regular basis,” he says. Brut COO Bill O’Brien declines comment, as does a SunGard spokeswoman.
Experts expect consolidation among the electronic execution systems like Archipelago and Brut that proliferated in the late 1990s. The new ECNs snared much of the market share in Nasdaq executions from Nasdaq’s own electronic systems and its market-making member firms. But excess capacity, extreme price competition and shrinking margins still plague the industry.
Greifeld clearly needs to do more. Nasdaq no longer discloses its market share, but in October, the last month for which data is available, it stood at 17 percent. Instinet and Archipelago have 29 percent and 26 percent of Nasdaq trading, respectively.
