Canadian Exchanges Sue Quotron
A $76 million suit filed by Canada's three major stock exchanges against Quotron Systems Inc. is but another cross to bear for Citicorp's beleaguered information services division.
The suit, filed last week in federal court in New York, charges Quotron with breach of contract and misrepresentation in the distribution of stock information from the Canadian exchanges.
A Losing Business
The legal action follows another loss-ridden quarter for Citicorp's information services business. Quotron has not turned a profit since Citicorp bought it in 1986 for $680 million. Quotron supplied most of the revenue for Citicorp's information business, which has been a big money loser.
The Toronto, Montreal, and Vancouver stock exchanges claimed that Quotron gave away trading data for free to customers, depriving the exchanges of usage fees.
The three Canadian exchanges allege that Quotron wrongly distributed stock-quote information to all its subscribers from 1985 to 1989. The Canadian exchanges said Quotron was contractually advised to tell them which customers got the information, so that they could be billed by the exchanges.
Quotron, the Canadian exchanges allege, turned over only a small number of names. The suit is an attempt to recover fees the exchanges believe they lost.
"The suit is without merit," said a spokeswoman for Quotron. "We intend to demonstrate that in court." Quotron is expected to reply to the charges within eight weeks.
A spokesman for the Toronto exchange said the exchanges did not have similar problems with other stock-information vendors and were not engaged in related lawsuits.
The spokesman said the exchanges discovered Quotron's breach of contract and misrepresentation in 1989, after visiting brokerage houses and other stock-quote users in the United States.
In recently reported second-quarter earnings, Citicorp stated that the information business had lost $45 million. The year-to-date losses stand at $94 million, on the way to a fifth straight year of reported losses.
In the past five years, Quotron's share of the market has declined from about 80% to near 60%. Two of its biggest customers, Merrill Lynch & Co. and Shearson Lehman have signed contracts to buy stock-quote information from ADP Corp., Roseland, N.J.
Quotron retained its biggest remaining customer, Paine Webber Inc., only after cutting the price of a recently signed contract.
Paul F. Glaser, who moved from Citicorp to head Quotron in 1989, retired after 18 months. A new boss, Thomas J. Cirillo, was appointed in April.
No Plan to Sell
Citicorp officials have repeatedly said they have no plan to sell Quotron. But the unit's continued dismal performance may be particularly draining to the banking company now, as it tries to rebound from sizable lending trouble.
"I don't sense any immediate plan to sell," said Ronald I. Mandle of Sanford C. Bernstein & Co. "But they'd like to improve their financial performance one way or another."