After a few weeks of attempting to get some information about French bank Credit Lyonnais' creation of an electronic trading operation in Bermuda, I finally managed to speak to Craig Lax, CEO of G-Trade.

G-Trade, wholly owned by a Credit Lyonnais subsidiary in Asia, will be a pure electronic agency dealer which receives orders through Global Tradebook, a new screen-based product by Bloomberg.

That is, the company will execute large blocks of trading stock for big institutions, pension funds, banks and brokers -- the "big 1,000 institutions'' in the world through Bloomberg's electronic network, Mr. Lax said.

"Our target clients are large institutions who want to deal in the international markets with anonymity in an efficient, electronic capacity,'' Mr. Lax said. "Although it sounds good, we are not a 'global electronic stock exchange' and please don't classify us as such. We don't think there is anything like this. We are the first people in this space and secondly Bloomberg has tremendous market share.'' G-Trade is expected to swing into action in December from 23 Church Street 24 hours a day, seven days a week. Another 15 staff are expected to come on board by the end of next year. The company will first target the Tokyo trading market and eventually move out to 65 markets. Mr. Lax said the company has also applied for Bermuda Stock Exchange (BSX) membership.

In doing so it will be joining Reuters' Instinet operation in Bermuda.

Instinet (Bermuda) Ltd. is currently doing billions of dollars of cross trades on the BSX. Cross trades allow a broker's customers to trade large blocks of stock off the major exchanges where the companies are listed.

Both operations fit in with the BSX's fully-electronic Bermuda Electronic Securities Trading system. Instinet, like G-Trade, is a pure agency broker.

Both aim to offer liquidity, neutrality, efficiency, reduced transaction costs, and importantly anonymity through an electronic communications network or ECNs as they are called in the business.

ECNs are described as computerised trade-matching systems that unite best bid and offer prices round-the-clock, while providing investors anonymity and cutting trading costs by bypassing broker-dealer commissions and so-called exchange fees, which charge investors for accessing quotes. ECNs automate the trading process, and many believe that exchanges of the future will be based on the ECN model.

Using the firms' electronic networks -- in the case of G-Trade and Bloomberg -- clients can communicate, negotiate, and trade electronically either directly with each other using a block brokerage service, or can link to exchanges using computer technology.

In an article on August 16 this year Fortune Magazine labelled the new breed of electronic communications networks or ECNs as a revolution in trading that "have blown apart the traditional US exchanges' stranglehold on trading equities''.

Instinet is the largest of the ECNs in the US market trading between 15 to 20 percent of the Nasdaq and is aiming to fill the gap between global capital markets and national stock markets by linking investors, issuers, and exchanges worldwide, "even if it means wiping out the entire ECN business,'' the article stated.

"Nowhere has Instinet's hubris stirred more wariness than in America. Led by its 36-year-old CEO, Doug Atkin, the company has pushed the US exchanges to embrace European-style electronic trading, which has lowered costs and helped boost volumes across the continent.'' Mr. Atkin's said the currently nine ECNs competing for Nasdaq orders in the US increases search costs for investors and stunts the growth of trading. His solution is to create a centralised, for-profit exchange for Nasdaq stocks -- an electronic stock exchange that will eventually mean ECNs will be a footnote in trading history, Fortune states: "Atkin is betting that with the globalisation of securities markets, investors and issuers will crave a single, global electronic brokerage service -- and he wants Instinet to fill that role.'' In 1998, Instinet earned about $255.6 million on $740 million in revenue. Now, Instinet is looking to build its business into real-time trading network by launching Instinet.com to provide retail customers with access to its institutional order flow.

Instinet led a consortium of US investors that grabbed a majority stake in Tradepoint, a UK-based electronic exchange that is the only foreign bourse cleared to operate in America.

According to Global Investment Technology magazine, a group of firms have announced plans to form a European ECN which will debut in early 2000.

Interestingly, Instinet has teamed up with E-Trade Group, the second largest online retail discount broker after Charles Schwab Corp., to provide after-hours online trading to retail clients.

E-Trade has incorporated a subsidiary here, but the company's PR department has not been forthcoming about its operations on the Island.

In another development, Datek Online Holdings's Island, Instinet's key competitor, has applied to the Securities and Exchange Commission to become an exchange. Island, an ECN that specialises in the retail market, trades about 10 percent of the volume on Nasdaq.

Charles Schwab Corp., Fidelity Investments, Donaldson, Lufkin & Jenrette and Spear, Leeds and Kellogg have invested in REDIBook, the fifth-largest ECN.

With the launch in December of Bloomberg's Tradebook SuperECN in conjunction with Investment Technology Group and Credit Lyonnais, Bermuda seem set to be a key part of the ECNs strategy in competing in the new era of global electronic trading.

Quote of the week "Geeks like working for geeks. Geeks don't like working for accountants. They don't like working for project managers. They are suspicious of management. In fact, they are suspicious of most things. What they relish is technology and other geeks,'' said Kevin O'Conner, managing director of commercial banking applied technology at Deutsche Bank at an IT directors' forum.

He continued: "Some people are seriously nerdy and it is in the company's interest that they remain nerdy. So you have to treat them nicely. Don't make them managers because they'll probably be lousy managers.'' Tech Tattle deals with topics relating to technology. Contact Ahmed at ahmedelamin y hotmail.com.