RealTime IT News

E*Trade Buys 25 Percent Stake In Electronic Network

Online broker E*TRADE Group Inc. Thursday announced it was buying a 25 percent stake in Archipelago, an electronic network for trading Nasdaq stocks, along with investment bank Goldman Sachs Group.

After the deal closes, E*TRADE, Goldman Sachs and Virago Enterprises and Townsend Analytics, Archipelago's founding partners, will each own a 25 percent stake in the network.

Archipelago is one of nine networks that have received Securities and Exchange Commission approval to allow stocks to be sold electronically outside the customary stock exchanges. It currently serves about 4,000 individual and institutional investors.

The deal could have substantial benefits for less frequent individual traders who have so far been shut out of the electronic networks. Generally, the only way for individual investors to get access to those markets is with expensive trading systems used predominately by daytraders.

Christos Cotsakos, E*TRADE's chief executive officer and chairman elect, said the purchase will enable it to give its customers faster service.

"Archipelago's trading system will provide E*TRADE with yet another opportunity to serve our customers who derive value from the speed, efficiency and anonymity associated with ECN-based trading, further leveraging our stateless architecture launched with our destination E*TRADE site," he said.

Duncan Niederauer, a managing director at Goldman Sachs, said the deal signifies the growing role electronic communications networks are playing in today's financial services market.

"Our investment in Archipelago demonstrates Goldman Sachs' continued commitment to provide our clients with the broadest array of liquidity services," he said.