Archipelago, REDIbook Finalize Merger Pact

Electronic communications networks Archipelago and REDIbook finalized their merger Monday. First announced last November, the deal creates another formidable competitor for Instinet(INET Quote).

Already, online exchanges have been lowering prices aggressively as trading volumes decline and competition for market share heats up.

The companies did not disclose the financial terms of their merger. Integration of Archipelago and REDIbook's order books and trading systems is scheduled to begin late in the second quarter and should be completed in the third quarter, they wrote in a release. Increased orders volume at the merged company should make for more liquidity, allowing for more internally matched trades and lower prices, analysts say. Internally matched trades are those that match buyers and sellers within an exchange.

In January 2002 Archipelago and REDIBook executed a combined daily average volume of about 475 million Nasdaq and listed shares. In dollar volume of Nasdaq trades, the two companies had combined market share of 9.7% in December of last year, behind Instinet's 12.3% and Island's 12.7%, according to a Salomon Smith Barney report.

Archipelago is preparing to launch a revamped exchange called Archipelago Exchange, or ArcaEx, in late March.