Island Ecn - How Island Works

HOW ISLAND WORKS

Suppose an investor decides to sell 100 shares of a particular stock for $20.00 a share. Island's system is scanned instantaneously for unfilled orders for that stock at $20.00. If a match is found, the order is executed immediately. If there is no match, the order is displayed on Island's order book until a matching order to buy is entered or the original order is cancelled. Island accepts orders from market makers, agency brokers, retail brokers, day-trading firms, proprietary trading firms, and institutional firms. Trades on Island can only flow through one of its seven hundred-plus client brokers; individual investors cannot use Island's services directly. During the 1990s, Island concentrated on serving retail investors; in 2001 it began to refocus its efforts on business-to-business trading.

Virtually all orders can be viewed, in real-time and without charge, on Island's Web site through the BookViewer, an online representation of Island's limit order book. The best-priced order on Island for a NASDAQ security is also represented on the NASDAQ Level II screen, where the best bids and offers of all market participants are posted. If an order on Island is the best price from among all the different market participants, it will also be featured on the NBBO, the National Best Bid/Offer display. Island was the first marketplace to make its order information available on such a scale. The BookViewer does not track the activity of the entire NASDAQ by any means. However, because Island accounts for such a high percentage of NASDAQ trading—about 16 percent in 2001—its online order book can offer a fairly accurate picture of NASDAQ activity. Island also provides investors with an online toolbox that includes a list of the 20 most active issues on Island; a time and sales report generator that shows what time trades took place, and at what price; and an instant alert feature that notifies investors when a stock hits a predefined price or level of volume.

Island sees tremendous activity every trading day—during the first two quarters of 2001 trading activity on Island accounted for approximately one in every 6 trades on NASDAQ. Trading at Island ECN grew by leaps and bounds in the 2000s. Between 1999 and 2000 volume doubled to 53.7 billion shares; it increased by 80 percent in 2001. Its base of client subscribers also grew rapidly, from about 150 in late 1998, to 400 at the beginning of 2001. By the end of that year the number had passed 700.