E*Trade customers will have access to after hours trading traditionally available to large institutional investors, fund managers and broker/dealers, giving them the chance to respond to breaking news and late market developments.
E*Trade shares jumped 9 percent on the news, up 2 1/2 to 29 3/8 Tuesday.
Instinet, owned by Reuters Group PLC (Nasdaq: RTRSY), is the world''s largest agency brokerage firm and a leader in after hours trading online. Instinet accounts for almost 20 percent of the Nasdaq''s daily volume and Instinet''s institutional clients represent more than 90 percent of the equity funds under management in the U.S. It was already advancing plans to move after hours trading online.
The deal, which should be implemented by September, will give E*Trade customers the longest after hours trading window, from 4 - 6:30 p.m. ET -- twice as long as E*Trade''s nearest competitor. It also provides customers with unique online access to trading opportunities in both the New York Stock Exchange and Nasdaq listed equities, whereas competitors are limited to Nasdaq trading. Competitors such as Island and Eclipse are also overshadowed by the liquidity on Instinet.
"What our customers want is access to opportunity and a level playing field with larger institutional investors. It''s all part of democratizing personal investing,'''' said Christos M. Cotsakos, chairman and chief executive officer of E*TRADE in a company release.
Instinet also recently announced it has joined a group of investors, including E*Trade, by making a strategic investment in Archipelago LLC, an Electronic Communications Network (ECN). Archipelago is seeking SEC approval to establish itself as a registered, self-regulating stock exchange. In June, an Instinet-led consortium of five global financial firms acquired majority stake in Tradepoint, a U.K. screen-based for-profit exchange. Archipelago and E*Trade through its investment in Archipelago, are members of the consortium.
E*Trade, headquartered in Menlo Park, California, intends to expand its global reach by launching branded web sites in the top 20 financial markets worldwide. It is also in the midst of completing its merger with Telebanc, the nation''s leading branchless bank.
E*Trade reported a loss in its third quarter thanks in part to its aggressive marketing campaign.
Instinet recently announced plans to expand into the fixed income market, making it the first electronic brokerage to do so.