Instinet is to close its fixed income electronic brokerage business with the loss of 107 jobs after reporting its first quarterly loss since going public.
Instinet announced a net loss of $34.7 million, or $0.14 per share, for the first quarter ended 31 March, 2002, compared to a net profit of $50.1 million, or $0.24 per share, for the first quarter of 2001. The operating loss was $3.4 million, or $0.01 per share, in line with expectations.
In the first quarter, Instinet's share of Nasdaq-listed volume slipped further to 11%, compared to 11.7% in the previous quarter and 15.1% in the first quarter of 2001.
Intense competition and price cutting by rivals has unseated the company from its market-leading position among ECNs and precipated a management shake-out. The sudden departure of the company's long-time chief executive Doug Atkin two weeks ago has been followed more recently by the resignation of Instinet Europe chief Rod Sinclair and the redundancy of Robin Berrill, managing director of European business development.
Instinet says the closure of the fixed income operation has been taken against the background of a global economic slowdown and the uneven pace of acceptance of electronic fixed income trading platforms. The company began developing its service in 1988 and started trading in the spring of 2000. To permit the orderly termination of customer trading, the service will operate through Friday, 3 May. As a result of the closure, Instinet is expected to incur a charge of $15 million-$20 million, and realise a net annual cost saving of approximately $37 million.
The company insists that the cost-cutting will not effect the introduction of new technology and trading product roll-outs. Deployment of two new trading applications - Instinet Trading Portal, for active asset managers and hedge funds, and patent-pending Newport, for passive and quantitative fund managers - is on schedule.