The transaction may expand trading options for plan sponsors and money managers.
After this transaction, the investor group and management will have a combined ownership of over 90% of Datek Online with Datek’s ownership reduced to less than 10%.
The investors plan to spin off electronic communication network Island as a separate company. Island is currently 85% owned by Datek. As part of the change in ownership, Island says it will ramp up its efforts to become the nation’s first for-profit exchange.
Threat to Exchanges?
Regulated as brokers, ECN trading systems act more like a stock exchange. Their presence has already extended trading hours for institutional and individual investors alike, and has been viewed as a competitive threat to the existing exchanges.
Some $3 trillion has changed hands on Island ECN this year, with some 47 billion shares traded.
Bain Capital, a private equity firm that currently has more than $12 billion under management, leads the investment group. The group also includes TA Associates and Silver Lake Partners, another private equity investment firm.
The investment is reportedly the largest private equity investment in an online financial services firm.