Sunday, January 23, 2005

Instinet up for sale ?

Reports indicate that Instinet (INGP) may be acquired by Archipelago (AX). While I am not marking this as a hit, I bought and sold (at a price higher than the current value, even after the runup following the rumors) Instinet shares after a sharp short-term spike earlier last year.

This is just the beginning of electronic markets / exchanges. If you are willing to buy and hold for a decade buy into stocks of all the players that have been going public lately - Archipelago (AX), MarketAccess (MKTX), Arbinet (ARB), Espeed (ESPD), Nasdaq (NDAQ), OptionsXpress (OPXS) (to go public in a week or so ).

The middlemen have been allowed to go on for too long in this business, adding to costs and leading to inefficient execution, not to mention all the possibilities that human-intervention brings along with it. The major specialist firms, Labranche (LAB) and Van Der Moolen (VDM), are the losers in the long term, but both do represent value plays in the short term and will likely be looking to sell themselves soon.

I own Archipelago and Labranche stock.


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