Fidelity Investments has partnered with several Wall Street firms, including Citigroup, Credit Suisse First Boston and Lehman Brothers, to revamp the Boston Stock Exchange, turning the 170-year-old mart into an electronic network rivaling the New York Stock Exchange and Nasdaq, Boston Globe reports this morning.
If realized, BSE would own 64% of the venture, Fidelity 18% and the other firms the remaining 18%, with Fidelity and the other partners contributing $20 million to get the network off the ground.
Fidelity's aim has long been to drive down trading costs, while building large trading scale and some regulatory leverage of its own.
"In the past, Fidelity has been frustrated because it hasn't had any say in the major electronic trading venues," Sang Lee, managing partner with consultancy Aite Group, told the Globe.
As the paper's columnist Andrew Caffrey aptly puts it: "This is a period of incredible ferment in the trading world," noting how the Securities and Exchange Commission adopted the trade-through rule, mandating that brokers find customers the best, rather than the fastest, price. As such, the regulation now requires floor brokers on the New York Stock Exchange and other major stock markets to step outside their prices, and even direct orders, if necessary, to electronic crossing networks.
For its part, the Boston Stock Exchange could certainly use an infusion of new life, as its revenue declined 20% last year. However, Bean Town's stock exchange has already had a taste of electronic trading, having launched an all-electronic options exchange in 2004. Already, this venture has captured an astounding 6% of the options markets.
Spokespersons for Fidelity, the Boston Stock Exchange, Citigroup, CSFB and Lehman declined comment.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.