Founded in 1996, Island ECN was an electronic marketplace that facilitated execution of Nasdaq and listed stock limit orders.
Prior to Advent's investment, the company was a subsidiary of Datek Online, a leading Internet-based retail brokerage. Concurrent with the December 2000 recapitalization of Datek, Island was spun out as an independent company, with the same investor base and board as Datek. At the time, Island was the second-largest ECN, executing approximately 200 million shares of Nasdaq retail order flow per day on behalf of approximately 300 broker-dealer customers.
The company grew significantly in 2001 and 2002, with average daily order flow increasing to over 500 million shares per day. Island's share of Nasdaq trading volume increased from 8% to over 12%, elevating it to the No. 1 position in the market. The company also gained significant penetration in the listed market, including over 30% market share of trading in QQQ, the most liquid security in the world.
In September 2002, Island merged with Nasdaq-listed Instinet, the No. 2 ECN, in a transaction valued at approximately $500 million. The combined company executed close to 25% of average daily Nasdaq trading volume at the time of the merger.