Israel's electronic brokerage Insider is closing down moments before takeoff. Although it was ready to roll down the runway into cyberspace, the e-trade website's backers decided that the small volume of its potential market did not justify the massive investment required to run it.

Insider was established in January 2000 as a joint venture by Israeli investment bank

Nessuah Zannex

with Wall Street, New York-headquartered

AB Watley Group


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(Nasdaq:IGLD), and the Tel Aviv-based company IFAT Holdings. Nessuah Zannex owned 25% of the venture, which had barely completed its beta phase.

Nessuah Zannex CEO Eran Goren explains that the investors prepared major infrastructure for the electronic securities venture. Its facilities included a hefty marketing system, a dealing room with 20 positions, and additional systems that were very expensive to operate - especially compared with the low trading volumes in Israeli cyberspace.

Goren says that the operating costs of the venture would have been enormous. Its initial stage of operation would have required several millions of dollars.

The size of a project needs to correspond to the size of the market, Goren adds. He notes that trade in securities over the Internet has dropped by 30% to 40% in the United States in recent months. When Insider was established, in January 2000, day-trading was red-hot and cyberspace seemed like the ideal venue to set up an arena. Back then, 17 million users had registered to trade securities over the Web.

Golan believes that trading securities over Internet is appropriate to Israel too, but the size of the venture has to be in proportion with the size of the market.

Nessuah Zannex lost NIS 5.3 million in the third quarter, against netting NIS 5.8 million in the corresponding quarter of 1999. The company blames its poor results to the decline of the IPO market in the third quarter.