Brokers Beware: Instinet Sets Plan to Offer Direct Trading

Yo Chuck! One of the baddest names in big-time electronic trading is pushing into Schwab's (SCH Quote) territory, as the retail investing industry continues to evolve toward self-service.

Bowing to competitive pressures, Instinet is targeting the savviest and most profitable e-traders for a retail brokerage it plans to launch in April. The trading arm of Reuters (RTRSY Quote), best known for its electronic order-matching system and after-hours trading network, will offer these customers direct access to the markets, cutting out middlemen such as market makers and specialists in many cases.

The service, akin to the market access that daytrading firms give their customers, will create a formidable competitor for firms chasing online brokerages' most active and lucrative customers. It will also continue the industry's evolution toward unmediated stock-trading, which some observers say offers investors the best prospects for fairer and faster executions. That stands to further squeeze the middlemen themselves. ...