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Nasdaq swoops for $1.9bn Instinet

Keeping pace with NYSE

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The Nasdaq, long rumored to have its eye on Instinet, has gotten its electronic patsy for $1.9bn in cash. In so doing, the Nasdaq closed the second major deal this week of US financial markets, following NYSE which merged with Archipelago.

The structure of the Nasdaq/Instinet buy is quite complex. Once the deal is completed, Instinet's electronic marketplace - INET - will be combined with Nasdaq's existing business. Nasdaq, however, will sell off Instinet's other business to a number of companies.

Private equity firm Silver Lake Partners will gobble up Institutional Broker - Instinet's brokerage subsidiary - for $208m. The Bank of New York will then buy the Lynch, Jones & Ryan, Inc. (LJR) securities subsidiary for $174m in cash.

“This transaction will allow NASDAQ to compete more effectively with other U.S. and international market centers by making our technological platform more competitive, which will result in greater cost efficiencies and improved quality of execution in our market - qualities that today’s individual and institutional investors demand," Nasdaq CEO Bob Greifeld.

In a similar deal, NYSE and Archipelago agreed to form a publicly traded company that is 70 percent owned by the venerable NYSE and 30 percent owned by the upstart electronic exchange.

The two deal together highlight a trend toward consolidation in the US stock markets and the heightened role of electronic trading. ®

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