|Headquarters||1095 Avenue of the Americas, New York, NY 10036, United States|
|Key people||Jonathan Kellner, CEO
Frank Freitas, COO
Jonathan Kellner, Regional Head - Americas
Shaun Bramham, Regional Head - Asia-Pacific
Adam Toms, Regional Head - EMEA
Instinet is an institutional, agency-only broker that also serves as the independent equity trading arm of its parent, Nomura. It executes trades for roughly 1,500 “buyside” clients such as asset management firms, hedge funds, insurance companies, mutual funds and pension funds. Headquartered in New York and with offices in twelve other cities around the world, the company provides sales trading services and trading technologies such as the Newport EMS, algorithms, trade cost analytics, commission management, independent research and dark pools of liquidity.
Instinet is best known as one of the first off-exchange trading alternatives, with its “green screen” terminals prevalent in the 1980s and 1990s, and, more recently, as the founder of Chi-X Europe and Chi-X Global.
Instinet was founded by Jerome M. Pustilnik and Herbert R. Behrens and was incorporated in 1967 as Institutional Networks Corp. The founders aimed to compete with the New York Stock Exchange by means of computer links between major institutions, such as banks, mutual funds, and insurance companies, with no delays or intervening specialists. Through the Instinet system, which went live in December 1969, the company provided computer services and a communications network for the automated buying and selling of equity securities on an anonymous, confidential basis.
Uptake of the platform was slow through the 1970s, and in 1983 Instinet turned to William A. "Bill" Lupien, a former Pacific Stock Exchange specialist, to run the company. Lupien decided to market the system more aggressively to the broker community, rather than focus exclusively on the buyside as his predecessors had. To expand its market, Lupien brought on board Fredric W. Rittereiser, formerly of Troster Singer and the Sherwood Group, as President and Chief Operating Officer and David N. Rosensaft as Vice President (later SVP) of New Products Development. Together, they successfully introduced many innovations which made Instinet an integral tool for traders on both the "buy" and "sell" sides of the market.
As a result of Lupien’s refocusing of Instinet (which the business was renamed in 1985), the firm grew rapidly in the mid-1980s. During the Crash of 1987 electronic trading system allowed trading when brokers and market makers were unwilling to answer their phones during the free-fall. Reuters, which in 1985 had acquired a portion of the firm, acquired the entire business in May 1987, though under the deal Instinet would remain an independent, New York-based subsidiary. Lupien and then COO Murray Finebaum would resign shortly thereafter.
Alternative Trading Systems regulations
Under Reuters, the Instinet platform continued to grow through the late 1980s and into the early 1990s. By the time that the U.S. Securities and Exchange Commission introduced the Order Handling Rules and alternative trading systems (ATS) regulation in the late 1990s, Instinet was the dominant electronic communication network. However, these rules also gave rise to new competitors, some of whom employed new pricing schemes. By the early 2000s, these competitors, helped by missteps at Instinet that included rapid expansion, over-spending and slow uptake of technology, had managed to erode the firm’s market share. As a result, Instinet in 2002 merged with the Island ECN, renaming the Island technology platform Inet.
Reuters went on to IPO Instinet in 2001 keeping a 62% ownership stake. It would hold this until the 2005 acquisition of Instinet by NASDAQ in 2005, in which Nasdaq retained the INET ECN and subsequently sold the agency brokerage business to Silver Lake Partners.
In February 2007, Nomura purchased the firm from Silver Lake for a reported $1.2 billion. Instinet is today operated as an independent subsidiary of Nomura and run by CEO Fumiki Kondo. In December 2009, in commemoration of its 40th anniversary, Instinet worked with the Make-a-Wish Foundation to grant wishes to 40 children with life-threatening illnesses. In May 2012, Nomura announced that it would transfer electronic trading in the United States to Instinet, with the goal of eventually making it the electronic trading arm for all of Nomura. However, in September 2012, Nomura announced that it would instead make Instinet its execution services (cash, program and electronic trading) arm in all markets globally excluding Japan.
- 1980: First direct market access system
- 1986: First after market crossing system
- 1993: Instinet OMS, one of the first modern execution management system (EMS) platforms
- 1999: Instinet Helix, one of the first market routing platforms
- 2007: Chi-X Europe, the first and largest European multilateral trading facility, which in 2011 was acquired by BATS Global Markets
- 2008: Chi-X Global, operator of Chi-X Australia, Chi-X Canada and Chi-X Japan, which is now owned by a consortium of financial institutions, including Instinet
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