NEW YORK – Instinet Group Inc., a major electronic share dealer, Friday said it laid off 150 employees, or about 7 percent of its staff, as it looks to cut costs amid intense competition for share orders.
"One of the biggest challenges they've got is their competition is getting stronger," said Antonia Ness, senior research associate at brokerage Raymond James & Associates. "I think that they are struggling a bit to come to terms with their position in the market."
This is the second round of layoffs for Instinet, which shed 240 jobs over the summer. The firm, which is majority owned by global news and information provider Reuters Group Plc , is fighting declining share volumes in the slumping stock market.
"They came from different parts of the whole company, not only here in the United States," spokeswoman Silvia Davi said of the lay-offs.
Instinet declined to specify which departments were hit hardest but acknowledged cuts at its core equity trading unit. Instinet did not comment on the possibility of further job cuts.
Firms across Wall Street have instituted a slew of job cuts throughout the nearly 2-year-old stock market slump. Merrill Lynch & Co. Inc., the No. 1 full service brokerage recently announced it shed 9,000 workers in the fourth quarter.
Instinet is being squeezed between the impact of Wall Street 's slump and decreasing market share as competition heats up among ECN's, analysts said.
One of Instinet's rivals, The Island ECN, recently reported its Nasdaq trading volume surpassed Instinet's for the first time ever in November, according to data provided by the National Association of Securities Dealers. That trend continued in December, with Island gobbling up 10.1 percent of the Nasdaq share volume, and Instinet garnering 9.2 percent.
Instinet, like other companies that run electronic communication networks (ECNs), generates the brunt of its business from matching Nasdaq shares for customers. ECNs, which electronically connect buy and sell orders, account for about one-third of Nasdaq's trading volume.
ECNs like Instinet have some immunity to the stock market's volatility because they derive revenues from fees for shares traded on their network, rather than the traditional brokerage practice of selling high and buying low. But, a prolonged bear market often dries up trading volumes.
Instinet's total share volume fell 30 percent to 4.73 billion shares from 6.79 billion in December -- cutting into revenues at the New York-based firm.
The firm trades about 50 million New York Stock Exchange and American Stock Exchange shares per week. Like other ECNs, the vast majority of Instinet's volume comes from Nasdaq, about four times as much as NYSE and American Stock Exchange listed shares.
Instinet also faces increased competition from a planned merger of competitors Archipelago and RediBook, which had combined share volume of 8.6 percent of Nasdaq share volume in December. In addition to the jump in share volume, the merger should enable the two firms to cut costs, analysts say.
Traditional share dealers also have been hit hard by the market slump. NYSE specialist firm LaBranche & Co Inc. recently reported a nearly 20 percent drop in fourth-quarter profit. while fourth-quarter earnings of Nasdaq market maker Knight Trading Group Inc. plunged 62 percent.
Shares of Instinet rose 6 cents to $8.71 in afternoon trading on the Nasdaq stock market. The shares have fallen 40 percent since their public debut at $14.50 in May.