Sidebar: Nasdaq's Randich Discusses Financial Industry Mergers

Computerworld - Nasdaq faces increased competition from the NYSE with its proposed purchase of Archipelago Holdings, which trades 25% of Nasdaq's volume today. But according to CIO Steve Randich, unlike Nasdaq's recent move to buy Instinet Group and its earlier purchase of Brut, the NYSE and Archipelago merger involves few synergies. In an interview with Computerworld's Lucas Mearian, Randich discussed the challenges facing his firm and its rival.

Steve Randich, CIO at Nasdaq

What hurdles do you see facing the merger of the NYSE and Archipelago? I think there's political and cultural hurdles. To me, there's no discernable synergy, in that NYSE is going to continue with their hybrid market and electronic trading model. And it's not clear to me how they're going to be leveraging Archipelago technology.

Does the NYSE merger with Archipelago change your plans for merging Nasdaq and Instinet technologies? It validates our decision with the Instinet acquisition, which was planned well in advance and executed with a lot of insight and thought about how we'd take advantage of the platform, how it would affect our cost structure and how it would affect our overall competitiveness in the trading space.

Why did you decide to replace the Nasdaq order entry platform with Instinet's? It's got some very unique and innovative designs that allow it to be mind-bogglingly efficient. I don't have direct detailed insight into those because the deal isn't closed. But from the observations I've made and my team has made, we feel there's an efficiency there that is huge.

What data migration issues do you face with the Instinet acquisition? The real challenge is you have hundreds of customers that are connected to these platforms across Wall Street and across North America. You want to make the migration as transparent as you can to the customer base. The way we achieve that -- and we're going through this very same process for the Brut integration -- is you try not to make any changes to the front-end interface.

How does all this consolidation affect the capital markets, and how will technology play into it? At one end, there's reduced fragmentation across the industry in terms of market venues, but not so much that there's no competition. There's still a relative ease of entry in the industry for new, efficient competitors with innovative technologies to come in and keep existing venues honest. At the same time, it's allowing the industry to achieve economies of scale that ultimately pass the savings that result from that scale on to investors.

Read more about management in Computerworld's Management Knowledge Center.