Instinet Builds Two Technology Platforms For Fixed Income and Equities

NEW YORK--Instinet is "in the middle of migrating its [equity] trading technology to a new platform," Doug Atkin, Instinet's chief executive officer, told reporters last week. And that is just one of two massive technology efforts currently underway, sources at Instinet say.

Although Instinet officials declined to provide further details, sources familiar with the new equity trading platform project say many decisions have yet to be made. Instinet is, however, committed to sticking with HP/Unix technology on the back end. And back-end migration is slated to take place sometime next year.

Front-end technology decisions for the equity trading systems have yet to be finalized, sources close to the project say, but they may follow the lead set by Instinet's brand-new fixed income trading platform, which has largely been chosen.

That system, which Instinet built from scratch, uses "the latest Web-based, Java-based architecture," Atkin told reporters last week. In fact, Atkin said technology was one of the reasons he was visiting the West Coast last week.

So what does the new fixed income platform look like? Sources close to the project say that Instinet's settled on Sun Starfire Servers, an Oracle database, Persistence application server software, Tibco's publish/ subscribe technology and Java clients. In fact, some sources say it's the largest Enterprise Javabeans development ever. These sources say beta tests are expected to begin in April.

Further details weren't available at press time. But the projects are clearly massive ones. But Atkin told reporters that Instinet spent $100 million on technology last year.

Upgrading its existing system and its new efforts to build a fixed income system will assure Instinet's flexibility, and that seems to be a priority these days in the face of the SEC's ATS regulations and Instinet's current discussions with both the NASD and the New York Stock Exchange.

In fact, Atkin says Instinet's options "are quite clear." They include essentially staying as is, going it alone as an exchange, or partnering up with an existing exchange. Although it has been considering those options for some time, talks with the two exchanges have heated up considerably in the last few months.

And there's good reason. First, Instinet is, as Atkin says, at something of a crossroads. Teaming up with the likes of Nasdaq or the New York Stock Exchange would provide an immediate solution to meet the pending SEC rules and give Instinet even more clout to widen its growing customer base abroad.

But analysts say, don't hold your breath; exchanges are notoriously political animals, and talks like these often result in little more than, well, talks. In addition, a deal with Instinet would probably come at a far greater cost to the exchange than one with a smaller (or in-house-developed) ECN. Stay tuned.