Online brokerage E*Trade Group Inc and investment bank Goldman Sachs Group, LP have each agreed to acquire a 25% voting interest in Archipelago, which operates an electronic communication network (ECN) for stocks traded on the Nasdaq National Market. Under the agreement, E*Trade and Goldman Sachs, as well as founding partners Virago Enterprises LLC and Townsend Analytics Ltd, will each own one-quarter of the voting interest in a new company, Archipelago Holdings LLC. Archipelago is one of nine ECNs to have been granted permission by the Securities and Exchange Commission to allow transactions to be matched electronically outside the exchange trading system. ECNs allow orders to be directly routed and displayed on the floor of an exchange without the need for an intermediary, thus assuring order anonymity. Archipelago claims to currently serve roughly 4,000 individual and institutional traders. Since regulatory changes were passed by the SEC in 1996 to allow ECNs, they have played a growing role in equities trading and now account for about 22% of the share volume for Nasdaq stocks and nearly 5% of NYSE issues. E*Trade says the deal positions it as a leader in the market for all-electronic financial and investment services for online investors. The company reckons Archipelago will improve the speed and efficiency of its service by giving customers more choices through which their securities orders can be executed. Archipelago will continue to be based in Chicago and will be operated as an independent company. Its current management and technology development team will remain in place and no personnel changes are planned, according to E*Trade.
