Reuters Group PLC announced Wednesday that its subsidiary Instinet Corp. is abandoning plans to build Instinet.com, a Web trading platform for retail investors.

The brokerage subsidiary will continue to focus on making its electronic communications network trading facility available to institutional investors, Reuters said.

Instinet’s network, the largest of nine like it, matches Nasdaq buyers and sellers and prioritizes the trades according to price and time. Traditional electronic routing methods do not necessarily make best-price matches.

Reuters cited current market conditions in the retail online brokerage market, including high customer acquisition costs, low trading levels, and a substantial decline in the value of the business, as reasons for Instinet’s decision to stop work on Instinet.com. The retail service had been in development for about a year.

A spokesman for Instinet.com would not say whether the reorganization would prompt layoffs. “There are a number of employees with a number of skills that could be used in other parts of Instinet and throughout Reuters,” he said.

But an unnamed source close to Instinet.com said the company had already announced that 65 to 75 people would be laid off, effective Jan. 3.

Reuters is preparing an initial public offering of Instinet Corp., so abandonment of the retail network may be designed to make the subsidiary more attractive to investors.

Electronic communications networks are a tough sell in the retail sector because “the vast majority of consumers have no idea how their trades are matched,” said Octavio Marenzi, managing director of Celent Communications of Cambridge, Mass.

“There is potential to offering ECN service to a particular niche of consumers, but these consumers would be very few, though they would be high-end and trade a lot,” he said. “It makes sense to clean up your books before you pursue an initial public offering, and that has probably driven this more than anything else.”

The electronic networks match about one-third of all trades on Nasdaq, according to Celent. Instinet processes about 30,000 trades a day.

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