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Island is an Alternative Trading System (ATS). Island is a computerized network that gives brokerages the power to electronically display and match retail, institutional, and proprietary stock orders.

The great benefit of Island is empowerment. Island has made the dream of a level playing field for the individual investor a reality. Through Island, two retail orders, one to buy and one to sell, can meet directly, without paying a spread. This idea of letting the individual have "the power to move the market" is revolutionary, and sprang out of the order handling, display, and best execution rules that the SEC instituted. Island has been the mechanism of bringing that value to the public to a large extent. On Island, your retail order not only is shown to everyone on Island's vast network, but also to every other participant on Nasdaq.

Island has grown tremendously. According to Nasdaq, we are the largest and the fastest growing ECN. Volume totals by quarter are available on our Website, www.isld.com, as well as daily totals. In January, we AVERAGED 95,000,000 shares traded a day.

I attribute our growth to several factors. One, we were there at the beginning. I know that two years doesn't seem like a long time ago, but when you're trying to build liquidity it is. Two, we have been the lowest price provider in our industry. Third, we believe that the two-year track record of speed, robustness, scalability, reliability, and efficiency that Island has earned has engendered trust with our subscribers. Fourth, and probably most importantly, liquidity begets liquidity. If you have a huge source of volume like Island, those that don't already use Island have an incentive to use it. The value of any network, including exchanges and Island, can only be quantified by liquidity. Liquidity is the mark of visibility and efficiency. A little over a year ago, for every four orders entered into Island, there was about one execution. That ratio in January was up to 48.5%, or almost two orders entered to one execution. The orders aren't "better" or "smarter", there's just more of them. That's exchange economies at work. Bigger gets bigger and better, smaller gets ever more marginalized.

The initial critical mass of volume on Island was pure retail. As we eventually got so much of this retail flow in one place (Island), Island started attracting Market makers, full-service firms, institutions, dealer, etc. I see the network effects of our tremendous size further extending deeper into these markets.

Island is regulated by its biggest competitor: Nasdaq. We pay them over a million dollars a month for access and to report our trades. They then take that information that we paid them to take and re-sell it to the world. By some estimates, the revenues from these fees are upwards of $200,000,000.00 a year. Island would like to compete in this arena, differentiating itself once again based on service and price. Competition is a good thing, and Island welcomes the tremendous interest in this arena that the success of Island and Instinet have attracted. Competing with the referee, as it were (Nasdaq), is tough, though.

Our strategic objectives for the year to some degree center around expanding our breadth of product to include NYSE stocks. Getting representation on that market is not going to be easy, but we are pushing hard to bring competition to the Big Board monopoly. Filing to be an exchange ourselves may be one solution.