July 12--Gerald D. Putnam, CEO, Archipelago

Archipelago is one of four originally qualified Electronic Computer Networks (ECNs) approved by Nasdaq in January 1997. Archipelago offers superior order en try and execution capabilities using our proprietary SmartBook software. Archipelago revolutionized Nasdaq trading by allowing our customers to access any participant in the national Nasdaq quotation system. Thus, we created a National Order Book and gave customers access to all available liquidity, including all other ECNs. In recent months, Gold man Sachs, JP Morgan Securities, E-Trade and American Century have acquired equity stakes in Archipelago.

The Archipelago system empowers its customers to retain personal control of their orders. The system combines user-friendly software, SmartBook algorithms, liquidity, speed, anonymity and position management to provide best execution and ease of portfolio management. The net result is lower execution costs and better prices, producing an enhanced bottom line.

Starting from ground zero in January 1997, Archipelago has become the third largest ECN in terms of volume. Our ECN presently handles in excess of 40 million shares daily. Our volume has more than doubled since the beginning of 1999.

Many factors have contributed to our rapid growth. The ECN offers access to any creditworthy entity, including mutual funds, hedge funds, index funds, broker/dealers, wholesalers, marketmakers, floor traders and professional trading operations. Retail investors can access the ECN through their broker/dealer. For professional traders, the anonymous order en try feature has created confidence and trust in the system. Open architecture and the reliability of the ECN are also big factors.

We expect our volume to expand rapidly for the foreseeable future. Archipelago has several large clients that will be added shortly, and we continue to add more new accounts each month. In the future, there may be a consolidation in the industry, and we believe that our superior technology, strategic alliances and strategic investors will keep us in the forefront.

Archipelago's threats are not necessarily from our present competition but rather from potential regulatory or political changes. Accordingly, we continue to offer input into the policy-making process with the SEC, NASD and other market participants. We try to be vigilant about any proposed regulatory or exchange decisions that may affect our business. In addition, we have tried to offset some of these threats by aligning ourselves with strategic partners and offering routing choices to various other Alternate Trading Systems.

To continue to enhance our pro duct, to become an exchange, further overseas expansion, Tradepoint, etc.