DEFINITION of ‘Instinet’
Instinet is a global financial securities service that operates an electronic securities order matching (trading) and information system. The Instinet system allows members (primarily professional traders and investors) to display bids and offer quotes for stocks and to conduct transactions with each other. As a global securities broker, Instinet enables institutional customers to trade securities in global markets.
BREAKING DOWN ‘Instinet’
Instinet is an institutional, agency-only broker that also serves as the independent equity trading arm of its parent, Nomura Group. It executes trades for asset management firms, hedge funds, insurance companies, mutual funds and pension funds. Headquartered in New York, the company provides sales trading services and trading technologies such as the Newport EMS, algorithms, trade cost analytics, commission management, independent research and dark pools of liquidity.
Instinet is best known as one of the first off-exchange trading alternatives, with its “green screen” terminals prevalent in the 1980s and 1990s, and, more recently, as the founder of Chi-X Europe and Chi-X Global.
According to industry research group Markit, in 2015 Instinet was the third-largest cash equities broker in Europe.
Founding of Instinet
Instinet was founded by Jerome M. Pustilnik and Herbert R. Behrens and was incorporated in 1969 as Institutional Networks Corp. The founders aimed to compete with the New York Stock Exchange by means of computer links between major institutions, such as banks, mutual funds, and insurance companies, with no delays or intervening specialists.
Instinet is Wall Street’s oldest electronic communications network, and after it was acquired by Reuters Group in 1987, it and other electronic communications networks evolved into major threats to the established stock exchanges. The company split its electronic communications network and its brokerage business into Inet ECN and Instinet, respectively, in 2003. NASDAQ then acquired Inet ECN in 2005 and Instinet was sold to a private equity firm. In addition to sales trading, Instinet provides front-end technology, algorithmic trading, liquidity sourcing, independent research, commission management and transaction analysis.
Nomura Acquisition of Instinet
In February 2007, Nomura purchased the firm from private equity firm Silver Lake for a reported $1.2 billion. Instinet is today operated as an independent subsidiary of Nomura and run by CEO Fumiki Kondo. In May 2012, Nomura announced that it would transfer electronic trading in the United States to Instinet, with the goal of eventually making it the electronic trading arm for all of Nomura. However, in September 2012, Nomura announced that it would instead make Instinet its execution services (cash, program and electronic trading) arm in all markets globally excluding Japan.