Instinet Cuts Prices in Bid to Capture More Volume

Instinet (INET Quote) slashed the average prices for broker-dealers trading Nasdaq securities by 60% Tuesday, as the price war for market share with rival electronic trading exchanges escalates.

Instinet first cut prices in October and then again just five weeks ago. In mid-February, the Island ECN announced that it would cut trading prices by as much as 47%. Nasdaq recently announced its own price cuts, but to be eligible, traders have to place at least 95% of their trades with the Nasdaq Stock Market, rather than using another platform or exchange.

"It's a game of leapfrog," said Glenn Schorr, an analyst at Deutsche Banc Alex. Brown. Instinet was lately falling 28 cents, or 3.4% to $7.85. The steep reductions in average rates have primarily been confined to the sell-side of transactions, said Schorr, where Instinet and its competitors pay broker-dealers rebates in an effort to boost liquidity. ...